People interested in pursuing franchising often ask “is now the right time?” especially if they are used to a typical structured corporate role and are now considering taking the next step into a role that offers more flexibility. Timing in any line of work plays a significant role, but in franchising, specifically, there are several factors to consider, both personally and professionally, before deciding to jump into this industry.
Considering the Current State of Franchising
Since 2014, the number of franchises that have opened in the US has been on a nearly steady incline. Of course, 2020 was a time when the pandemic impacted almost every industry, so there was understandably a drop in the number of individuals who pursued a franchise. Nonetheless, 2021 brought those numbers right back up, as there was an approximate net gain of 26,000 franchised businesses that opened in the US, bringing the total to 780,188 franchises, which is 6,585 units greater than what was reported before the pandemic in 2019.
Projections for 2022 conducted by the International Franchise Association have found that franchising is leading economic recovery in the US, while franchises’ growth rate will reach 5.7% totaling $501 billion, which is higher than pre-pandemic reports. By the end of the year, there are expected to be more than 792,000 franchises in operation, indicating impressive growth.
Now is as great of a time as ever to pursue a career in franchising. It is also worth noting the current rate of consumer spending, as this also plays a role in why timing is important when investing in a franchise. Like franchising, consumer spending levels fell during 2020 because of the pandemic, as fewer people were going out to spend money. However, 2021 saw major expansion and it has led us to even greater rates for 2022. Consumer spending rates in the US for the first quarter of 2022 were $13,881.11 billion and have increased to $13,916.87 billion for the second quarter. These rates are higher than in 2021 and previous years, and it is still growing.
These factors can help you consider if it is the right time for you to invest in a franchise. Knowing that you are entering at a time when franchises are growing in number and when consumer spending is at a high could help you learn more towards ‘yes’. If projections were not as strong, you’d want to reconsider your timing.
The Competition and Interest In your Current Market
While franchising and consumer spending rates are currently high, this is not to say that every industry is performing well. This is why it is important to conduct thorough market research on the industry of the particular franchise you are interested in, as there are some faster-growing franchise industries than others. Doing this can help you better understand if the products and/or services you would sell as a franchise owner have high consumer interest now, and if that interest is projected to sustain. For example, if there is an industry that is booming right now and has positive future growth projections, jumping in on that could be a great opportunity. However, entering into a franchise opportunity that is incredibly trendy right now but has an uncertain future is riskier.
Conducting industry-specific market research can also help you assess the current competition. While some franchise systems prefer entering into a market without competition, others find entering a market with existing competition can help better showcase their differentiators. In other words, if the franchise business stands out from the competition, customers will be able to see their benefits more clearly when comparing them to others operating in their community. It’s important to invest in a franchise that offers various strengths to help you stand out.
Franchise Real Estate Availability
Similar to purchasing a home, if you don’t move quickly, someone else may swoop in and make an offer. The same can be said for franchising. Where your franchise is located can play a role in its success, and this is why timing is important, as you want to enter into a franchise agreement at a location that can offer you the greatest visibility and accessibility. However, these highly desired areas can go quickly. This is why if you are interested in bringing a franchise to your community, acting fast so that you can secure an ideal location, is a plus.
And depending on the current economic market, landlords may offer deals that you wouldn’t see otherwise. Throughout the pandemic, for instance, many businesses had to make the difficult decision to close their brick-and-mortar location. This means many landlords are looking for tenants as there are more empty storefronts and deals available.
Keep in mind that some franchises select a location for their franchisees. While franchisors always want their franchisee to generate success at a location, real estate availability and timing still remains a factor.
The Role of Finances
Buying a franchise is not a small investment, and franchise organizations will list the minimum financial requirements their franchisees must possess to qualify. If you do not meet what is outlined, you will not be able to proceed. Therefore, to qualify as a franchisee, you need to consider your net worth, that you have enough liquid capital, determine if you can qualify for a loan to cover some of the necessary franchising costs, and so on.
Every situation is different, but it is important to consider finances in every aspect – both for the franchise and your own personal life. If interest rates on loans remain low, is it a good time to buy a franchise? Or if you do not have the liquid capital that you will likely use to pay for the ongoing expenses of a franchise, is taking out a large loan a good move? Timing can play such an important role here, and waiting it out for a few years to generate a greater net worth, for example, could make franchising something more feasible and prosperous for you because you have your finances in place.
Purchasing a Franchise During Off-season
If you want to bring an ice cream franchise to your community, for example, it may be best to get the ball rolling during the winter months (aka the off-season) as this can give you time to prepare to open when there can be a greater influx of customers during the summer season.
Is the Timing Right for You Personally?
Before entering into a franchise agreement, you need to ask yourself if pursuing this role and the responsibilities that go with it fit with your current lifestyle. While there are many types of franchisees, some that put in more time than others depending on the initial plan made with the franchisor, make sure you’re ready to take one whichever role you assume whether that’s as a silent investor or as the owner and operator. If you are at a point where you can see yourself taking on a leadership-type role, the timing may be right for you to invest. Franchising can be such a rewarding experience to take on, but before investing, you want to make sure you can do so effectively and that it can fulfill your needs.
Franchising with Dogtopia
If you find the timing is right for you to invest in a franchise, be sure to check out how Dogtopia prepares our franchisees for success. As well, our detailed FAQ section is a great hub for information regarding the pet industry, Dogtopia, and your investment. If you are ready to proceed, please fill out our online inquiry form.