Franchise ownership has long been a popular wealth-building strategy among Americans. It provides the advantages of owning an income-generating business while avoiding the risk of launching an independent start-up.
I have four key aspects of the franchise model which make it an ideal long-term alternative for diversifying and preserving your assets, even during times of high inflation or market downturns.
Amazing ROI Opportunity
To combat inflation, your investments must outperform the market. The greater your returns, the more protection you'll have against unavoidable cost increases, especially during periods of higher-than-average inflation. Even with high-yield savings accounts and CDs yielding far below 2% interest, these options will only keep you afloat at best.
Depending on the franchise and the amount of your investment, the typical return on a franchise investment makes it a strong option for wealth building and inflation protection. Furthermore, these businesses have a reasonably quick time to profitability. As a result, in a relatively short time, you may begin to improve your portfolio or utilize the extra money to enjoy more freedom sooner.
Other alternative investments may have comparable ROI potential, but they are riskier and have hold times of five to ten years. That's a long time to have to wait for results.
Diversification That Is Recession-Resistant
Investing in franchises diverts your money away from market ups and downs, lowering your risk while delivering consistent, dependable income year after year. This allows you to capitalize on favorable market conditions while relieving the financial path during a market downturn.
For numerous reasons, franchises are a recession-resistant investment. For starters, they are frequently service-based enterprises. When a company meets a basic consumer need, such as auto and home repair, personal care, waste management, healthcare, or education, it can weather a recession more effectively.
Additionally, franchise businesses do not "go it alone." They benefit from a tried-and-true management and operating approach, as well as a franchisor who has a vested interest in their success. This additional level of assistance can help franchise owners in navigating difficult economic times.
Inflation Protection That Is Dependable
Because franchises are based on products and services, they provide some inflation protection. As the cost of products and services grows, business owners can raise their prices accordingly. Despite inflation, customers will continue to come through the door since franchisees provide essential needs. Revenue for these businesses may grow in some situations during periods of higher inflation.
Compared To Typical Start-Ups, Franchises Are Less Risky
Starting a business is an excellent way to take charge of your financial destiny. It enables you to create a supplementary income source while also protecting against inflation.
Franchise investments eliminate the headaches of starting an independent business. They run according to a well-established franchise plan with carefully laid out marketing, operations, and financials. As a result, the tried-and-true framework can assist business owners in avoiding "reinventing the wheel." This can lower the risk for new entrepreneurs.
Now that you understand why franchise diversification works, what’s next? Should you scale wide or go deep? Here’s a breakdown.
If you would like more information about the importance of portfolio diversification and the benefits of franchise ownership, please schedule a call here.
