Why not Consider Purchasing a Franchise Instead of Investing in the Stock Market? | Be The Boss

Why not Consider Purchasing a Franchise Instead of Investing in the Stock Market?


Mar 11, 2013

San Diego, CA. (October 20, 2008) /PRNewswire/ - - - With all eyes on Wall Street over the past few weeks, it is understandable that business owners are feeling a little neglected and underappreciated. The nation's big banks may command the headlines and most of the direct assistance from the federal government, but for most small businesses, the profitability continues.

Last year alone, companies with fewer than 500 employees accounted for 99.9% of the nation's 27.2 million businesses, including 20.4 million without any employees at all, census data shows. Small employers pay 45% of private-sector payrolls and over the past decade have created up to 80% of net new jobs every year. Together, these firms produce 13 times more patents per employee than large corporations, make up over 97% of all exporters, and generate over 28% of total export value.

In total, small businesses are responsible for more than half of private-sector gross domestic product.

“I'm getting a little tired of hearing everyone from the President on down telling us to invest in the stock market,” said Carl Kosnar, Managing Partner of The Kosnar Group, franchise development consultants. “In my opinion, if you want to help build America in these difficult financial times, invest in your own business. More specifically, invest in a national brand franchise; your chances for success will increase substantially over starting your own independent small business.”

Kosnar further added, “I don’t trust the stock market these days because it is out of my control. First, I do not determine how the company is being run or how their profits are invested. Next, the governmental agencies responsible for monitoring the various stock exchanges have truly abrogated their responsibilities to the investing public.”

Some people are more comfortable not starting their own business from scratch. They would rather join a business with a proven record of accomplishment and national brand recognition. A franchise can be formed as a sole proprietorship, partnership, or corporation. Some of the best-know franchises are McDonald’s Jiffy Lube, 7-Eleven, LA Boxing, and Holiday Inn.

Over 9 million people in the United States work in a franchise. Franchised businesses now take in $1 of every $3 spent by Americans for goods or services, or 40 percent of all national retail sales, about 1 trillion dollars. In fact, 1 out of 12 American businesses are franchises, and a new franchise opens every six and a half minutes of each business day. The most popular businesses for franchising are restaurants (more than 80 percent of all franchises), retail stores, fitness gyms, hotels, and automotive parts and service centers.

When you think of franchising, however, don’t confine your thoughts to the United States. Small, midsized, and large U.S. franchisors have expanded overseas, often with great success. For example, McDonald’s has over 25,000 restaurants in 117 countries serving 40 million customers. Ranked as the world’s greatest brand by the Interbrand Group, an independent branding consultant, McDonald’s plans to accelerate its global business by adding as many restaurants outside the United States in the next 4 years as it did in the last 30 years.

Advantages of Franchises

1. Management and marketing assistance. A franchisee has a much greater chance of succeeding in business because he or she receives an established product, help with choosing a location and promotion, and assistance in all phrases of operation. It is like having your own store with full-time consultants available when you need them. Some franchisors are helping their franchisees succeed by helping with local marketing efforts rather than having them depend solely on national advertising. LA Boxing Franchise Corporation does all of the above and also assists with recruiting all the franchisee’s employees. You have a whole network of fellow franchisees that is facing similar problems and can share experiences with you.

2. Personal ownership. A franchise operation is still your store, and you enjoy much of the incentives and profit of any sole proprietor. You are still your own boss, although you must follow more rules, regulations, and procedures than you would with your own privately-owned store.

3. Nationally recognized name. It is one thing to open an ice cream store. It is quite another to open a Baskin-Robbins. With an established franchise, you get instant recognition and support from a product group with established customers from around the world.

4. Financial advice and assistance. A major problem with small businesses is arranging financing and learning to keep good records. Franchisees get valuable assistance and periodic advice from people with expertise in these areas In fact, some franchisors will even provide financing to potential franchisees they feel will be valuable parts of their franchise system.

Historically, the failure rate for franchises has been lower than that of other business ventures. According to the International Franchise Association, a Washington, D.C.-based trade group, franchises have a 66 percent higher success rate than independent businesses. However, franchising has grown so rapidly that many weak franchises have entered the field, so you need to be careful and invest wisely.

Franchising has penetrated every aspect of American and global business life by offering products and services that are reliable, convenient, and competitively priced. The growth experienced in franchising throughout the world could not have been accomplished by accident. Franchising clearly has some advantages over investing in the stock market.