Advantages and Disadvantages of Franchising

Starting any business is risky.

Within the first year, 20% of small businesses fail. The following year, another 10% will fall by the wayside. By the end of year 3, 40% of owners see their business collapse. After that, there is a steady failure rate of around 5% until, by the 10th year, 66.4% of new businesses are dead in the water.

These scary figures come from the US Bureau of Labor Statistics.

But what if you can buck the trend? What if there was a way to ensure that your investment in a new business is safe and secure? Well, you can by putting your hard-earned money into a franchise. The figures from a study conducted amongst franchise owners recently showed that over 90% survived after 2 years and 85% survived after 5 years.

So, what are the advantages and disadvantages of investing in a franchise?

Advantages of Franchising

Turnkey Business

Franchises are a known quantity. They have systems and standard operating procedures that are tried and tested. Businesses within the franchise network have a proven formula that works. And depending on the type of franchise you purchase, you essentially get a turnkey business with all the requirements in place from day one.

Brand Recognition

Rather than starting with zero publicity and public awareness, franchise businesses have a public profile. Your potential customers are already aware of the brand. Your clients want to deal with a reputable company and franchises provide the level of professionalism and trust that only comes from being in business for many years.

Buying Power

Franchises have buying power. Because of their large network of stores or locations, franchise owners get to benefit from the power of volume. With the backing of a large franchise organization, individual business owners get to enjoy the benefits that are normally only available to much larger organizations.

Higher Profits

You’ll get to enjoy higher profits, as the franchise is already set up with the right margins in place from day one. You won’t have to test the market and find the perfect profit percentage for your business as it is already done for you.

Lower Risk

Because all the risk factors have already been taken into account, your investment enjoys a lower risk than a new business with no track record. As we see above, new businesses are particularly vulnerable in the first 5 years of their lives. A franchise owner has a much better chance of making a success of their business than non-franchise business owners.

Disadvantages of Franchising

While there are many positives to buying into a franchise, there are a few things that you need to take into account to ensure that it is the right investment for you.

Restricting Regulations

Most franchises come with a long list of restrictive conditions. These rules and regulations are designed to give a business the maximum chance of succeeding and are based on experience and professional management expertise.

If your personality is not suited to following the rules, then you may struggle to adapt to this business environment. While you may feel you know better, the franchisor is the arbiter of what can and cannot be done with your franchise.

Here are a few of the things you may have little or no control over:

  • Products
  • Advertising and marketing
  • Resale conditions
  • Business location
  • Pricing
  • Signage
  • Layout
  • Décor
  • Hours of operation
  • Holidays

 

Initial Cost

The initial cost may well be higher than if you were to go it alone. However, the franchisor will have calculated exactly what you’ll need to meet your obligations. It is also good to remember that the franchisor needs you to do well. If you are a success, then they make more money and both parties win.

Ongoing Investment

While not all franchises require ongoing financial investment, others may require that you pay royalties, training costs, and advertising expenditures. You may also be required to upgrade shop fittings and billboards after a certain number of years.

Lack of Financial Privacy

Depending on the franchise agreement, you may have to present your financial statements to the franchisor regularly. If you don’t wish for anyone to know how well or poorly your business is doing, then this can be a stumbling block for some investors. This openness is not a bad thing though, as it allows the franchisor to offer timely advice if things are not going quite as well as you might have hoped.

But what if you could reduce the negatives and take advantage of all the positives that come from owning a long-running, successful franchise?

Introducing Taxleaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping business owners and investors maximize their returns.

It is crucial that you consult with a knowledgeable and experienced accountant to help guide you through the various stages of your franchise investment, especially if you are looking for ways to maximize your income.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with TaxLeaf:

Cesar Buenavista, Doral, Fl

“I am an Account Manager with TaxLeaf and have been working with clients for more than 6 years. The technology they provide is incredible. I have access to everything from my phone if I need it. They are very professional and provide excellent support for me and my employees.”

To help you learn more about how TaxLeaf can assist you with investing in a franchise, stop what you’re doing right now and click the link below.

Your Franchise Options

Or call us now to secure a FREE 30-Minute Consultation with one of our franchise experts.

888-Y-TAXLEAF

What’s Going on with Florida Real Estate?

The Florida real estate market is pretty hot right now, with prices on the increase. This is great for sellers but not ideal for buyers.

When compared with the same period in 2021, Q1 2022 median sales prices are up over 21% with the trend expected to continue into 2023. However, with mortgage rates up about 1% from a year ago, the cost of borrowing money looks set to increase over the next couple of years.

What that means for you, if you’re interested in getting into real estate, is that now is a good time to get in, especially if you’re looking to invest in single-dwelling homes. The available stock is small and, based on the data, Florida enjoyed the highest increase nationally.

In fact, it was so good, that prices increased 50% more than in any other state.

With real estate providing an excellent hedge against inflation, it makes sense that you should consider Florida when planning your next property investment.

Which City’s Housing Markets are Booming in Florida?

So, which market is the best one to look at right now?

Tampa, situated along Florida’s Gulf Coast, had the biggest year-on-year home price increase of 32.5% in March 2022 among the 20 largest metro areas in the U.S.

Another Florida city that’s making a splash is Orlando. The home of Disney World and Universal Studios, one of the 40 major metro areas, placed first among the most improved housing markets by rising 138 spots on REALTORS’ ranking of the hottest housing markets.

What are 2022 Predictions for the Florida Housing Market?

Predictions from real estate professionals are that the housing market is going to remain buoyant for the remainder of 2022, going into the first quarter of 2023.

What might change the outlook, is if mortgage rates increase substantially.

Price Growth Could Slow due to High Mortgage Rates

Home purchasers with limited cash reserves may reconsider their purchase intentions if mortgage rates rise. This demand reduction will see some Florida markets’ price growth slow or stop. However, purchasers with more available liquidity and who can afford higher interest rates might feel more confident.  They will be able to locate homes they can afford if the price increase is moderated.

Florida’s supply of new homes has lagged behind population growth for the past 15 years.

Adding to that is the rise in post-pandemic migration to Florida, which widens the supply-demand imbalance and raises property prices. Buyers consequently lack confidence in their ability to locate a home they can afford. Fewer home sales follow from this.

So, lower-priced homes will be in demand and the smaller, less popular areas within the Florida market will see an increase in demand on the back of rising mortgage rates.

The larger metros will be harder hit than the smaller areas, with remote work on the rise and the move to a slower, less big-city feel gaining traction.

But, predicting the housing market cycle is always difficult. With a multitude of factors at play, trends could change from one month to the next. This is why finding property professionals who are dialed into the market is critical to avoiding costly mistakes.

Introducing Taxleaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping business owners and investors maximize their returns.

It is crucial that you consult with a knowledgeable and experienced accountant to help guide you through the various stages of investment, especially if you are looking for ways to maximize your retirement income.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with TaxLeaf:

Cesar Buenavista, Doral, Fl

“I am an Account Manager with TaxLeaf and have been working with clients for more than 6 years. The technology they provide is incredible. I have access to everything from my phone if I need it. They are very professional and provide excellent support for me and my employees.”

To help you learn more about how TaxLeaf can assist you with real estate investment needs, stop what you’re doing right now and click the link below.

Experienced Real Estate Investment Advisors

Or call us now to secure a FREE 30-Minute Consultation with one of our investment property solution experts.

888-Y-TAXLEAF

Why Accounting is an Important Part of Your Business

It is easy to get caught up in your day-to-day business activities and forget that you need to keep accurate records.

That’s where accounting comes in. It helps to keep you organized so that the information you need is readily available. There is a difference though, between bookkeeping and accounting.

Accounting Helps to Make Sense of Your Business

Bookkeeping is concerned with the administrative and transactional aspects of your business. Once the transactions are recorded by a bookkeeper, accounting helps you to make sense of the information.

It helps you to make decisions and is an important tool to help you understand what is going on in your business. Accounting records help to ensure that your cash flow is positive and alert you early on that there might be a problem. You can then use that information to change course or make arrangements to ensure that your business has the resources it needs.

The IRS Requires Your Accounting Records

The IRS is also interested in your accounting records. They need schedules to support your tax returns as well as access to financial statements that determine the profitability of your business. Without a robust accounting system, you will struggle to satisfy the IRS’s demands for information.

The Banks and Investors Need Your Financial Statements

When you require a business loan or go looking for investors, the first thing they’ll be interested in is looking at your financial reports. These are compiled using your accounting system.

No records, no money!

Management Accounts Help You to Manage Your Business

Your accounting system also helps to keep you accountable. The timely recording of transactions and their effect on your profitability and cash flow will determine the success or failure of your business.

By recording your actual figures against a budget or projection, you’ll be able to measure your results and see whether your strategies are working.

Introducing Taxleaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping business owners maximize their business potential.

It is crucial that you consult with a knowledgeable and experienced accountant to help guide you through the various stages of growth in your business.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with TaxLeaf:

Cesar Buenavista, Doral, Fl

“I am an Account Manager with TaxLeaf and have been working with clients for more than 6 years. The technology they provide is incredible. I have access to everything from my phone if I need it. They are very professional and provide excellent support for me and my employees.”

To help you learn more about how TaxLeaf can assist you with your bookkeeping and accounting needs, stop what you’re doing right now and click the link below.

Audit and Accounting Services

Or call us now to secure a FREE 30-Minute Consultation with one of our accounting experts.

888-Y-TAXLEAF