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Glenn Sandler, CPA, of G.I. Tax Service on 8 Reasons Why a Franchise is a Better Investment Than a Traditional Startup

Many people dream of running their own business—it's the American dream. Successful business owners not only make a good living, but they also don't have to answer to anyone. They are their own boss, and they can be proud to have built something from the ground up. Before you decide to take out a second mortgage to chase your dream, however, perhaps you should consider investing in a franchise instead. Because most businesses that are started from scratch tend to fail within the first few years, buying a franchise might be a better investment for you. Here are eight reasons for doing so:

1. It costs less to invest in a franchise.

It costs a lot of money to start a new business. You're going to have to invest in a store or office space and staff. Even if it's the type of business that you can run by yourself from out of your garage, you're going to have to put money into marketing, equipment, and supplies, all of which are going to add up rather quickly. Business owners who aren't aware of the eventual cost often run out of money before they even catch a glimpse of profit. A franchise will typically provide investors with an accurate estimate of how much money is needed, and how much capital you should have. You won't have to spend nearly as much money on marketing since the franchise is already an established brand.

2. It's easier to obtain financing for a franchise.

Trying to get the money together to start your own business can be extremely challenging. You're going to have to have excellent credit, not to mention assets to your name that you could potentially put up for collateral. Unfortunately, many lenders will reject small business loan requests because of the inherent risk of failure. 

However, lenders are more willing to provide financing to those investing in an established business that has a history of success. Lenders will offer better terms because of this, especially if they've provided loans to investors for that specific franchise before, and those loans were or are being paid back in full. Potential franchisees may also obtain financing through the franchise itself, as many franchisors either offer in-house financing options or have a relationship with a third party that provides financing to their investors.

3. A franchise will have an already established brand.

An already established brand is much easier to work with than a new business that nobody knows about. You'll already have an existing brand identity and customer base, which means you're more likely to draw in customers for your franchise with less effort than it would take to find customers for a brand new business.

4. A franchise will have a proven business plan.

If you're starting a business from the ground up, you had better have a thorough business plan to serve as your foundation. Otherwise, you'll end up failing much faster than anyone could have anticipated. To formulate a business plan, you'll need some knowledge or experience in running a business. However, just because you have a business plan doesn't mean that it will work. You may have to adjust it as you go along. With a franchise, there will be no such trial and error because the business plan has already been established, and presumably proven effective.  

5. No business education or experience is required.

If you're trying to start your own business and you have no prior business experience or education, you're going to be in for quite a challenge. Not only are these necessary for formulating a good business plan, but they're also necessary for all aspects of running and managing your business. However, you don't need either of these when you invest in a franchise. This is because most franchises will provide training and education courses before you even open up your store. Many franchises even have mentorship programs to help guide you through your first few years as a franchise owner.

6. You'll be able to take advantage of existing vendor relationships.

Products and supplies can take up a big part of your overhead costs as a business owner. When you buy into a franchise, you'll be able to take advantage of any pre-established relationships the franchise has with any vendors, which means you can obtain products and supplies at a large discount.

7. It will be much easier to market a franchise.

To grow a business, you need to market it. As the owner of a traditional startup, you're going to have to invest a large part of your resources into marketing. It's the only way that you can generate awareness of a brand that nobody knows about. Unfortunately, it takes a lot of time and money to market a business effectively, and many business owners simply don't have the marketing chops to be able to do so successfully.

Because the franchise brand is established, it likely is advertised on a national level. Your franchisor will help you market your franchise on a local level, whether it's by offering sound advice or by providing marketing materials that you can use.

8. You'll be given continual support from your franchisor.

Franchisors offer a wealth of resources to their franchisees. Not only will you have someone to talk to in case you have questions or need advice about your franchise, but many franchisors will provide their owners with access to other resources as well. These can include opportunities for continued education in the form of seminars, meetings, classes and more. You'll be provided with support to help ensure your success throughout the entire lifespan of your franchise.

These are eight reasons to reconsider starting your own company the traditional way in favor of investing in a franchise. As a franchise owner, you'll enjoy many of the benefits of a traditional business owner without the financial risk, not to mention stress, that's involved in building a business from the ground up.

About Glenn Sandler, CPA: Founded in 2013 by Glenn Sandler, CPA, G. I. Tax Service is America’s premier provider of year-round tax preparation and financial services including tax planning and small business formation assistance. G.I. Tax also reaches out to military vets with turn-key franchise opportunities. G. I. Tax Service believes in corporate responsibility and is active in a variety of local charities that help military families.

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