Are Franchises Good Investments?
Are franchises good investments? In general, yes. Learn why certain brands make good franchises to invest in.
Franchise Industry on Track
Franchise businesses play a major role in moderating economic downturns, improving consumer confidence, and bolstering the small business community. Despite high inflation and labor shortages, the franchise industry is projected to reach $860.1 billion in 2023, up 4.2% from forecasted earnings in 2022, according to the International Franchise Association’s latest economic outlook. To cope with challenges, franchises remained nimble and launched operational efficiencies and new technology to help drive growth, such as digital payments, kiosk ordering, and AI software to track inventory.
The home services industry continues to post positive growth. Over the last few years, it reached record levels as people stayed home to stay safe during the pandemic and took time to make home improvements. Creating multi-functional spaces became a top priority when high new home costs prompted people to choose remodeling instead of upgrading. Even as home costs trend down, people are turning to home remodeling to increase the value of their investment.
The average American homeowner spent $8,484 on remodeling projects in 2022 and completed 3.2 projects last year. Some of the most popular projects were painting and bathroom remodeling. Sales revenue for products related to bathroom remodeling notched double-digit gains last year, according to NPD Group.
“Consumers are still looking for ways to improve their living spaces and the way they make them feel. They are now looking for their bathrooms to not only be functional but also a source of tranquility,” said Joe Derochowski, NPD’s home industry advisor.
Low Risk, High Reward
If you want to capitalize on the thriving home services sector and launch a business with a proven track record, training, and ongoing support, a franchise business provides a low-risk, high-reward option. Home services franchises can be a good opportunity for people who are willing to make a significant upfront investment, follow strict guidelines, and value the support of an established brand and business model.
You don’t need industry experience to start a franchise, but knowing the market can give you a head start. Franchise owners can leverage the skills they honed in corporate America to help build a profitable venture, such as team-building, mentoring, and leadership.
Return on Investment
Still wondering, are franchises good investments? Look at the numbers. To determine the potential return on investment (ROI) for a franchise, you need to consider a variety of factors.
● Franchise fees & startup costs. The franchise fees and initial investment range will impact your franchise ROI. The initial investment typically includes the franchise fees, training, and ongoing support from the franchisor. Franchisors will ask for a certain amount of cash upfront.
● Operating costs. You will need to consider factors such as rent, inventory, payroll, utilities, marketing, and other ongoing expenses required to run the franchise.
● Sales and revenue. To determine your ROI, you’ll need to estimate your expected sales and revenue. The Franchise Disclosure Document can shine some light, although results will vary depending on the franchise, location, and other factors such as competition.
● Profit margins. Profit margins will also impact your ROI. You will need to determine the percentage of revenue that will be your profit after all expenses have been paid.
Once you estimate these factors, you can use them to calculate your potential ROI. Divide your estimated profit by your initial investment and multiply the result by 100 to get an ROI percentage.
It's important to note that these are only estimates, and actual results may vary. Before investing in a franchise, you should thoroughly research and evaluate the franchise opportunity, including speaking with other franchisees, reviewing financial statements, and seeking advice from financial professionals.
Home Services Franchise Opportunity
Premium Service Brands is a leader in home service franchises. We franchise an award-winning lineup of 10 brands, including 360° Painting, ProLift Garage Doors, The Grout Medic, and House Doctors. We’ve been helping entrepreneurs answer the question, “Are franchises good investments?” for more than 20 years.
We provide people with the tools and reputation they need to launch a business in their local community. We offer training and guidance, marketing support, management resources, and best practices from our network of franchisees to ensure our local owners get a solid return on investment.
To learn more about making an investment in a home service franchise, get started by connecting with someone from the Premium Service Brands’ team.