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Is a Franchise a Good Business Opportunity?

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Instead of starting their own business, entrepreneurs may become a franchisee. The franchisee buys the rights to the franchisor’s license and they can then operate under the franchise’s name and use their successful business model.

With a proven successful model, franchisees are already a step further than if they were to start their own business from scratch.

Each franchise opportunity is different. The prominent factors that determine if franchises are a good business opportunity are:

  1. Franchise Fees
  2. Brand Potential
  3. Profitability
  4. Commitment
  5. Geographical Availability

Now, let’s look at each factor individually.

Franchise Fees

What is the initial investment?

Setting up a franchise requires fees and upfront costs. 

Upfront costs are needed by the franchisee as part of an investment. Depending on the company, this number can vary from hundreds to millions of dollars. 

Ongoing fees like royalty fees (also referred to as franchise management or service fees) require the franchisee to regularly pay the franchisor, which helps to cover the support services the franchisor provides.

Brand Potential

How seen is the brand? 

Take McDonald’s for example. It is undeniable how seen they really are. With franchises all over the world, their success continues daily, but this impacts how much you must invest.

McDonald’s requires millions of dollars to open a franchise. Although investing in larger corporations like McDonald’s reaps many benefits, it may not be attainable for you.

https://www.franchisedirect.com/ultimate-guide-to-franchising/franchises-vs-business-opportunities/

If it is a smaller brand, the initial investment may be lower, but you need to think about the brand potential. How seen is the brand? Does it have room for scalability? 

Profitability

How profitable is the brand?

If they’re not worth much, it may not be the best investment.

To help determine a business’s profitability, you can examine the following:

  • Unit Growth: How many franchises do they have? How many of these have opened recently?
  • Success Rate: How successful are the new franchises? Are they struggling or are they making a profit?
  • Financial Evidence: Does the franchisor have sufficient financial evidence? Does it prove their successes?

Commitment

Investing in a franchise isn’t like any other business investment. They require you to be fully committed, take part in vigorous training and work for up to 80 hours per week. This of course depends on the franchise, but if you aren’t committed, your franchise won’t grow.

https://investorjunkie.com/entrepreneurship/do-franchises-make-good-investments/

If you lack the time or business experience, you could become a silent partner if you have the capital to invest. You can team up with someone to oversee the franchise and you could reap most of the profits.

Geographical Availability

Franchises are more likely to profit if there aren’t many of them in a specific location. You should find out from your franchisor whether the geographical location that you have in mind is suitable. If not, you may have to reconsider your options.

Top 10 Franchises to Buy

  1. McDonald’s
  2. 7-Eleven
  3. Dunkin’ Donuts
  4. The UPS Store
  5. Popeye’s
  6. Sonic Drive-In
  7. Great Clips
  8. Taco Bell
  9. Kumon Math and Reading Centers
  10.  Sport Clips 

The Positives of Franchising

Franchising means that you don’t have to do it alone. By operating under an already established brand, you can offer products and services that people already know and love whilst having access to their resources.

Here are some positives of franchising:

  • Training: Franchisees will have access to training programs and ongoing opportunities that will help the success of their franchise.
  • Support: Franchisees will receive support and professional advice from franchisors and a team of qualified staff to assist them when needed.
  • Advertising and Marketing: Franchisees will have access to marketing research and strategies that they consistently use throughout all their franchises. This will also help to reduce costs by having readily available resources.
  • Equipment: You can rent or buy equipment that you may need. Some franchises offer payment plans to their franchisees which makes costs more manageable.
  • Hiring and HR: Franchisors should have hiring guidelines in place which detail what they expect from employees. This should help you to find suitable employees for your franchise.

The Negatives of Franchising

Whilst there are fewer negatives for franchising, they’re big ones! Becoming part of a franchise means that you’re part of a specific culture, and if that’s not what you want, then it could be a massive turn-off for you.

  • Limited Freedom: Whilst you have the rights to their license, you still must operate under their requirements. They don’t wish for you to change their model but to adhere to it.
  • Fees and Expenses: It’s safe to say that becoming part of a franchise can be a little pricey. From upfront costs to regular fees, you may not be able to keep up with all the costs that are needed to secure or maintain the franchise. Whilst money is no object for some people, others may have to take out loans to support them.

Conclusion

Whether franchises are a good business opportunity relies heavily upon you and your situation. Arguably, it depends on your financial situation and whether you can afford the initial investment costs and the costs thereafter.

If you carefully consider all these factors and think that it’s the right decision for you, then go for it!

Image credit:[:BADGSk3Wwk0]



What You SHOULD Do with Your Tax Refund

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Stop! Don’t buy that new iPhone with your tax refund! You can put it to much better use!

The money you get from your tax refund can be a great way to set yourself up for a better financial future. If you are expecting a pretty decent tax return this year, here are some smart ways to make your money work harder for you.

Invest for Emergencies

If your transmission in your car went out right now, would you be able to afford to replace it?

Did you know it is recommended to have between three and six months of living expenses in a liquid savings account?

If you do not have any type of emergency fund, using your tax return to start one might be extremely beneficial for you. 

https://www.smartaboutmoney.org/Topics/Insurance-and-Taxes/Tips-for-Filing-Taxes/Smart-Ways-to-Use-Your-Tax-Refund

Instances like this are exactly what an emergency fund is for. You don’t need to save all of your tax refund for emergencies, but it is best to put back as much of it as you can.

Pay Off Debt

Credit cards typically have a high interest rate making them hard to pay off. Instead of booking a vacation with your tax return—which might not be that fun right now anyway—pay off some of your debt instead.

  • Start with your debt that has the highest interest rate, such as your credit card balance that seems to never get any lower.
  • Getting rid of this type of debt will save you money in the long run by avoiding all of the interest charges. 
  • If you don’t currently have any credit card debt, or you don’t have an interest rate/balance that is manageable, consider paying down the balance of your car or your student loans.

Both of these actions will save you money on interest as well.

Invest for Retirement

There is no such thing as too much money when you are heading into retirement. Sure, you might already have a retirement plan, like a 401(k) where your employer matches your contributions. However, you can also open an IRA to increase your savings for the future. 

There are two types of IRA accounts: Roth and Traditional. When you put money into a traditional IRA, you get an upfront tax deduction. The money will grow tax-deferred, but you will need to pay taxes on the money when you start taking money out.

https://www.moneycrashers.com/what-to-do-with-your-tax-refund-money/

When you put money in a Roth IRA, there is no immediate tax deduction, but when you start taking money out in the future, it is tax-free. There are no required withdrawals with a Roth IRA, meaning there is some more flexibility in it. 

There are limits to keep in mind when it comes to IRA accounts and 401(k) accounts.

If you are under 50, there is a maximum contribution of $6,000 in an IRA and $19,500 in a 401(k). If you are over 50, there is a maximum contribution of $7,000 in an IRA and $26,000 in a 401(k).

Put Money in a College Fund

If you are a parent, you might be wondering how you can save for your child’s college education. The best way to do that is with a 529 college savings plan, which is similar to a Roth IRA.

Your money will grow tax-free, and as long as it is used toward education.

There are two different types of 529 plans. The first is a college savings plan and the second is prepaid tuition. 

The college savings plan is similar to a Roth IRA account because you invest after-tax money in mutual funds. This plan will fluctuate in value depending on the value of the investments. 

The 529 pre-paid tuition plan will allow you to pay for all or part of in-state tuition at a public college. They might also be able to be transferred to an out-of-state college. There is also an option for a private college prepaid plan.

Increase Your Down Payment

If you are saving to buy your first home, your taxes can increase your down payment. This can help save you from expensive private mortgage insurance and can also reduce the overall mortgage that you take out.

If you already own a home, you can use your refund to do some improvements around your home. Improvements and renovations can help increase the resale value of your home.

Even if you aren’t planning on selling your home any time soon, improvements are always a good idea. Renovate that bathroom or finish the basement, whatever your house needs!

Make a Donation

Donating is a great way to invest in something that you are passionate about. Focus on finding charities that do the best for people.

Before you donate any money to a charity, do not be afraid to ask the charity’s representative some important questions. Ask them how they spend the money that you are giving them and how they are changing the world.

There are so many charities that are worth donating to. The representatives will be happy to answer those questions for you.

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The Best Way to Invest a Tax Refund in 2021

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A tax return can be used for more than just buying your girlfriend a Gucci bag. It can be a great way to get yourself financially ahead. All you have to do is make it work for you.

If this is something you are interested in doing, here are a few smart financial investments you can make with your 2021 tax refund.

Pay Off High-Interest Debt

Typically, credit cards have a high interest rate which can make it seem impossible to pay them off.

Instead of booking a vacation or buying a new TV with your tax refund, take a shot at some of your debt instead. And, start with your debt that has the highest interest rate. Getting rid of these debts will save you money every month.

If you don’t have any credit card debt, use your refund to pay down your student loans, car payment, or mortgage.

Max Out Your 401(k) Contributions

Whether you are saving with a 401(k) offered through your employer or you are saving in an IRA, the more you put into your plan the less tax you will have to pay on it.

There are contribution limits, so it is important to keep that in mind. However, maxing out your contributions early in the year can put more money in your pocket each paycheck.

If you are under 50, you can put a maximum of $6,000 into an IRA. If you are over 50, you can put a maximum of $7,000 into an IRA.

A 401(k) has larger contributions, up to $19,500 if you are under 50 and up to $26,000 if you are over 50.

Fund Your Health Savings Account

With a health savings account (HSA), you can set money aside for medical expenses. This money can be used immediately or invested and used in the future.

HSA contributions are made with pre-tax money, so whatever you put in this account will not be taxable by the IRS. 

Eligibility for an HSA depends on your insurance plan. Here are the basics:

  • If your deductible is $1,400 or more as an individual with an out-of-pocket maximum of $7,000, you will be able to qualify for an HSA.
  • If your insurance plan is for a family, your deductible will need to be a minimum of $2,800 and the out-of-pocket maximum will need to be $14,000.
  • An individual can contribute $3,600 if they are under 50 or $4,600 if they are over 55.
  • Family plans can contribute $7,200 when the policyholder is under 50 or $8,200 if they are over 55.

Down Payment or Home Repairs

If you have been saving to buy a house, consider using your refund to increase your down payment.

This can save you money on your overall mortgage amount and your monthly mortgage payments. 

If you are already a homeowner, consider using your refund to fix up some things that have been put off due to lack of finances.

Replace the leaky faucet in the bathroom or replace your roof. Using this money for improvements can also increase your home’s resale value if you decide to sell your home in the future.

Invest in the Stock Market

If you would like to do something for your future besides putting money into a retirement fund, consider purchasing stocks.

https://investorjunkie.com/investing/tax-return-refund/

The market is known historically for providing better returns than both savings accounts and Treasury bonds. However, it is important to know that stocks aren’t secure, and returns are not guaranteed.

Stock prices fluctuate and the market can be risky. Financial advisors often do not recommend investing in the stock market if you are trying to save for the short-term. The market is much better for saving for long-term financial goals. 

You can invest in individual stocks or mutual funds. Mutual funds are bundles of stock, usually purchased through a robo-advisor or a broker.

Robo-advisors can offer low-cost investing options for those who are interested in managing their investments themselves.

It is also important to remember that investments are not under the protection of the Federal Deposit Insurance Corporation like a checking and savings account would be. If the stock market drops unexpectedly, you can lose your money. 

Open a Credit Card with Benefits

If you are debt-free and pay your credit cards off at the end of every month, you might want to invest in a card that gives you the perks you are looking for in a card.

This would be especially beneficial if your other cards do not offer benefits at all, or just not the ones you are looking for.

Some credit cards require you to pay an annual fee, but they will usually supplement that fee with travel rewards or cash-back rewards.

The perfect card should be able to save you more money in the long run, even taking into account the cost of maintaining the credit card.

Donate Money or Goods to Charity

If you are well off financially and can’t think of any use for your refund, consider donating to a charity of your choice.

Before choosing an organization, you should ask the charity questions about how they spend the money you are donating and what the organization is doing to change the world.

There are so many charitable organizations that are worth donating to, so don’t be afraid to ask questions about them and how they use the money for good.

Some charities will also accept donations in the form of goods instead of money. By donating goods to a registered charity, you can help them get things they desperately need quickly. 

Fund Your Child’s College Savings

If you are a parent, you might be interested in ways to pay for your child’s college education. Consider putting your tax refund in a 529 college savings plan.

As long as the money is used for education, you won’t be taxed on it. In some states, you might even be eligible for a tax break for your education contributions. 

With a 529 college plan, you can invest your money for added growth. This is a great way to achieve your savings goals for your child’s future college education. You can even set up recurring, automatic contributions as low as fifteen or twenty-five dollars each month. 

Image credit: Karolina Grabowska