What Is a Low-Risk Franchise and How Can It Benefit You?
You’re considering buying a franchise, but don’t want to risk too much. That’s understandable, especially if this is your first business. What you need to uncover are low-risk franchise opportunities. This is why we’ve written this guide exploring what low-risk franchises are, their benefits, and how to evaluate potential opportunities.
Understanding the Concept of Low-Risk Franchises
When we talk about low-risk franchises, we’re in the realm of business opportunities that have a lower risk of failing than a startup company. You’ll be investing in an established business with a track record of success. You’ll also benefit from training and support provided by the franchisor, in a recession-proof industry.
You’ll need to do your research, comparing different franchises and assessing the following characteristics of low-risk franchise opportunities:
Established brand in a recession-proof sector
A proven business model
Support offered by the franchisor
Higher success rates compared to startups
A history of successful franchisees
Lower initial investment requirements
Buy the right franchise business for you, and you’ll be investing in a business whose brand name gives you a head start to attract customers. Because its business model is tried and tested, you have an operational guide that has been shown to be successful – and you won’t make costly mistakes trying to find a successful way of working.
If you have little experience in running your own business, the training and support provided by a franchisor are invaluable. Another reason why low-risk franchises have a higher success rate than startups.
The most common economic sectors to find low-risk franchises include:
Food and beverage
Real estate maintenance and repair
Healthcare, fitness, and health and beauty
Education and tutoring
Types of Low-Risk Franchise Opportunities to Invest In
When we work with clients to find the right low-risk franchise business, we focus on three primary factors:
Franchises with low investment requirements
The lower the investment required, the less capital you risk. This also makes it easier to ensure you have the finance to see you through the first few months as you are establishing your business.
(Read our article ‘Should you borrow to invest in a franchise?’ for more info on financing your franchise investment.)
Franchises with established brand recognition
When you invest in a franchise with established brand recognition, potential customers will already be familiar with the brand. This makes it easier to attract business, and this means a faster trajectory to profitability.
Franchises with simple business models
Whether you’re an experienced entrepreneur or this is your first foray into entrepreneurship, a simple business model makes your job as a business owner much easier. Your employees will understand how you operate, and so managing your operations will be easier. This translates into fewer operational errors, better money management, and less time spent in your business.
How to Evaluate Potential Low-Risk Franchise Opportunities
When you are researching low-risk franchise opportunities, the first thing you should do is to make sure that you buy a franchise that is right for you. You’ll need to consider your personal business goals and buy a business that will help you to achieve them. It should also be a franchise that you can build on your personal strengths and in a business that you enjoy.
Once you have narrowed down the potential franchise opportunities, it will be time for more in-depth research and due diligence. These steps will help you complete this successfully:
Research the industry, market, and competition to gain insight into the potential for success in your chosen location.
Understand the franchise agreement
Review the franchise agreement and make certain that you understand the terms and conditions attached to the investment.
Research the franchisor’s requirements
What fees will you need to pay? What restrictions are there on how you operate your business? What training is provided, and what level of ongoing support will you receive?
You’ll need to answer these questions and more to understand the commitment you are making and the potential opportunity that exists.
Talk to other franchisees
Meeting with and talking to other franchisees is crucial. This can provide real-life experience of the franchisor, and their training and support, as well as provide an insight into any challenges that you may face.
Seek legal and financial advice
It’s crucial to select a good franchise attorney and get good financial advice. This will help you understand your financial commitment and legal obligations attached to buying a franchise business.
Checklist for Choosing the Right Low-Risk Franchise for You
Buying a low-risk franchise can be a terrific way to start a business without taking too big a risk. But if you buy the wrong franchise for you, you could end up regretting your decision. It’s crucial to get professional advice throughout every step of the process.
By doing your due diligence and research, and buying a franchise that is right for you in a low-risk sector, you’ll be set to own a profitable business that will power you toward your personal and professional goals.
The starting point for your success is to understand what type of franchise business is right for you. To discover your strengths as an entrepreneur, take our franchise assessment today.