Business

Should I buy a franchise?

Franchises may or may not be more profitable than a regular business. It depends on many factors including, the management skills of the owner, the location, the product being sold and the brand recognition, if you are appealing to a mass market or just local people. Franchises may be more labour intensive than a non-franchise business but again, this depends on the type of franchise/business.

Generally, people buy franchises for the systems and the support.

Most franchises sell for much higher prices than that of a similar business with similar profits. For an example, a franchised coffee shop with sales of $25,000pw and profits of $7,000 pw recently sold for $1m  or 3 1/2 years times profits. A similar shop (non-franchised) with Sales of $30,000pw and profits around $8,000 sold for only $700,000 in the same market.

Buyers will pay more for the franchise business but does it really make the business worth more?