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Anyone investing in a franchise business is hoping that it will generate wealth. And it certainly can happen, provided you choose the right franchise brand for the partnership. No matter which concept you choose to franchise, the only way you make money in franchising is by being associated with an emerging brand.
like every big brand Burger King either Taco Bell Started with just one shop. The sooner you enter a successful chain, the greater the benefits for a franchise. If you buy an established brand, the multiplier is so high that it usually takes six to 10 years to get your money back. Emerging brands tend to return initial investment in one to three years. Savvy franchisees combine those returns by reinvesting that free cash in more locations and creating a much larger, more valuable business on the same investment.
Although an emerging brand comes with a certain amount of risk, the rewards are much more than that.emerging brands It is less expensive to join, prime areas are available, costs to open are lower, and often better real estate can be secured. But most importantly, new franchise concepts give the franchisee a longer runway to make money.
For more than two decades, my company has helped brands like Five Guys and The Halal Guys grow from one-unit emerging concepts to powerhouse international brands. Although you can never be 100 percent sure that a new brand will be a smashing success, there are five things you can look for to hedge your bets that you’re backing a winner.
a passionate founder
Many entrepreneurs are just in it for the money, and it shows. When you’re evaluating an emerging franchise concept, take a close look at the owner. Is she really passionate about what they make, and are they committed to being the best in their segment? If not, run – don’t walk – away. It’s hard to make a business a huge success, and it’s not going to happen if the owner isn’t everything.
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Infused with passion, an emerging brand must have the authenticity to go the distance. Customers can smell brands that lack spirit, and they stay away. For example, when I evaluated plant-based burger concepts, I removed brands whose owners were not vegetarian and went with nomuWhose owner built his own brand because he couldn’t find a good plant-based burger anywhere in Los Angeles.
This segment also needs to emerge to make money with the emerging brand. You need a segment that isn’t just a fad, because you want a brand to grow in over 500 locations while the segment is still hot, so you want to see a long runway of at least 10 years. I see this, and the data supports it with respect to plant-based concepts.
strong unit economics
For a franchisee to become wealthy through franchising, a concept must have strong unit economics to support it. Numbers don’t lie. If a franchisor can’t offer impressive numbers, look for another emerging brand to invest in.
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Franchisees want to get their money back quickly. When evaluating a concept, look for the concept where you see a rapid ROI. This also means that a franchisee will be able to harness the power of compounding returns to reinvest in the concept and open additional units. The real ticket to wealth through franchising is when you are a multi-unit operator.
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By following these guidelines, potential franchisees can evaluate whether a new brand has the foundation to become the next Five Guys.