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Are Franchises A Good Investment? Six Factors To Consider

Wooden blocks with little stores painted on them connected by a white line

So, you’d like to start a business? That’s an incredible goal! While you could go into business yourself, there’s also the option of franchising. With a franchise, you get expert guidance throughout the process of opening your location. Plus, franchisees also receive access to a proven business model and get a head start by using a brand name. You may be wondering, are franchises a good investment? It turns out that franchising is an appealing investment for new entrepreneurs and experienced investors alike. We break down the top six factors to consider when researching franchise opportunities.

Personal Interest

This may seem obvious, but you should have strong interest in the business or industry you’re looking to join. You may want to ask yourself a few questions, such as, “Is this something I want to do every day for the foreseeable future? Is there a chance I would grow tired of this? Is this a business I can have a manager run once it’s established? Would I want to own more than one?” You should have a decisive answer to all of these questions. If there’s any doubt, it should be addressed before you contact the franchisor.

Industry

When determining if franchises are good investments, you need to conduct research about the franchise business’ industry. Given the tumultuous couple of years due to the pandemic, various industries have made strong comebacks, while others are still struggling. Make sure you fully understand where your chosen industry stands now and what the projections look like in the coming years.

The waxing industry is projected to see steady growth from now until 2026. With a compound annual growth rate (CAGR) of 8.31%, the waxing industry will grow by $321.22 million. Looking at the numbers, now is a great time to invest in a waxing franchise. Investors will have the opportunity to grow alongside the market.

Investment Costs

The investment level is always going to be a factor no matter which franchise you choose. As you research franchise opportunities, look for those that will achieve your financial expectations. Also, be sure to check out the financial requirements of each franchise opportunity. If you don’t have the required liquid capital, that could be an issue. However, if you don’t meet the net worth requirements, don’t sweat it — many franchisors can direct you to funding sources as a means to meet the requirements.

At Uni K Wax, the initial investment to open a studio range from $349,050 to $575,975. We require our franchise partners to have a net worth of $300,000 and at least $70,000 in liquid capital, positioning our brand as an affordable investment for new and seasoned entrepreneurs.

Support And Training

Since you’ll be investing a large sum of money to be part of the franchise, it’s important to first understand the kind of training and support you can expect from the franchisor. Here are some important questions to consider:

  • Who can I call if I run into a problem?
  • Will my staff receive training to ensure they’re following guidelines?
  • Will there be ongoing development for me as an owner?
  • What kind of resources are available to me to grow my business?

A good franchisor won’t just train you and your staff for opening and then disappear. Franchisors who are committed to your success will stay in constant communication in case you have questions or need help.

Financial Representations

Many franchisors have a section called Item 19 in their Franchise Disclosure Document (FDD). Keep in mind this is not a required section, so some franchises may not list their financial representations. While it’s not necessarily a red flag if a brand doesn’t have an Item 19, its absence should be taken into consideration as you decide on the right investment opportunity.

Item 19 shows how the franchise system performed the previous year, based on earnings reported by franchisees. In this section, you’ll find metrics like average unit volume (AUV) and average ticket amount. While a franchise can never make any kind of earnings claims or guarantee results, this section can help you understand the past financial health of the brand overall. If the FDD does not include Item 19, make sure to speak with the top performing and lowest performing franchise owners in the system to get the full picture.

Franchisor’s Reputation

The last factor when determining if franchises are good investments is the franchisor’s reputation. Understand that when you franchise with a well-known brand, it can be a double-edged sword. Having a strong brand name can give you a head start when growing your customer base and can even help with recruiting your staff. However, should there be an issue or scandal with one location, it can negatively impact yours – even if your location had nothing to do with the store in question. Your location could even be across the country, but you could still feel the effects. You should explore the franchisor’s reputation and ask about the company protocol for public relations crises.

Uni K Wax: A Franchise Investment To Consider

Founded in 1993, Uni K Wax has been a franchise for the corporate refugee for decades. The brand was the first-ever unisex waxing-only studio, and we now have locations in New York, New Jersey, Florida, and Texas. Uni K Wax provides a comprehensive training program for franchisees and their waxers, ensuring everyone is aware of the proper Uni K Wax technique.

We also have our own elastic wax blend. Made with only natural ingredients, it can be applied at body temperature, maximizing comfort for guests – and reducing the risk of potential injury.

So, are franchises a good investment? We’d say it depends on which one you go with. Invest with Uni K Wax and see how we’re different. To get started, request more info today.