Financial Freedom: Will I Regret Buying Into a Franchise?
“I thought I’d be my own boss,” wrote Mike. “They made a big deal about how I was going to control my own destiny. Then I found out the truth. I have to buy my supplies through their vendors, so I can’t shop around for the best price. I have to pay their commission on my gross earnings – so they get paid before Uncle Sam. It turned out that basically, I work for them as a manager. Except when I was a manager in a corporation, I wasn’t the one carrying all the financial risk.”
Mike had mortgaged his house – put his family’s financial well-being at risk – to buy into the franchise. Unlike some franchisees, he was able to get out of the business without a substantial loss, but Mike said that even if he’d made money, it wouldn’t have been worth the stress.
If you’re thinking of buying into a franchise, do your research carefully, and know the downside:
- Franchises are expensive. Buying into a franchise may cost you anywhere between $30,000 to $120,000. And what do you get for that money? The right to be a part of the franchise. You still have to acquire the facility, goods and people that you would have to get if you opened on your own.
- In addition to the buy-in cost, the franchise will take 10-15% of your monthly gross revenue.
- You don’t have the autonomy you’d have if you started your own business from scratch. The franchise gets to set policies and procedures, and if you don’t follow them, they can sever their relationship with you.
- Expect to put in the same long hours dealing with employees, management and overhead issues that you would with your own start up.
- As with your own start-up business, you, the owner, are the last one to get a paycheck. You have to pay the bills and your employees first.
Is financial freedom worth the cost and loss of independence that comes with buying a franchise? It is for some people, and it may be right for you. But read on as I continue my series on investment options, so you can make an educated decision.
As you make your investment decisions, I’d like to help you sort through all of the information. Success in 5 Minutes a Day will lead you to the wealth that you’ve never thought possible. Join the affordable program Success in 5 Minutes a Day and learn how you can put leveraging to use.