If you want to invest your money in any business venture, you will need the dedication and focus to constantly nurture your investment. Franchising is an option which essentially lets you run another company’s business as your own, and this short guide will compare this type of investment against investing in global markets.
Running a Franchise
Franchising involves the owner of a franchise (Starbucks, for instance) giving a franchisee (often an entrepreneur) a licence to run their own business under the same brand and ethos as the franchisor. The franchisee effectively takes the position of manager and owner of the business, whilst employing the business model of the franchisor.
When investing in this type of business as a franchisee, you are effectively using a business model and idea which has been proven to work, and which avoids much of the risk and uncertainty a regular entrepreneur faces when starting their own business.
A major benefit of investing in a franchise as a franchisee is that you gain a lot of control over your investment as opposed to investing in markets, as you can make executive decisions over the running of the business, and therefore influence its direction and success.
You also have the advantage of having a successful and powerful brand behind you, who will be constantly marketing their products to consumers. There is, however, a lot of work involved to run the franchise, and in this sense, it is very time consuming. It is therefore beneficial (potentially essential) to have a good amount of experience in your chosen sector if investing in a franchise.
Investing in the Markets
This method of investment involves putting money into the various assets around the world in order to make a profit from their value rising. There are many different markets and methods to invest, from gold to share trading, and each has its own behaviour and advantages.
Gold, for instance, is known as a safe haven asset, and thus a fairly safe investment since its core value rarely falls. In contrast, the forex market is known to be volatile since currency exchange rates are constantly rising/falling, and as such profits are made/lost far quicker. Compared to running a franchise, this type of investment is far more hands-off.
The variety of global markets open to investment is one of the most attractive aspects of this method, as it gives great scope and choice on where to invest your money, and investments can also be spread over as many markets as you like. There is also far less work in managing your investments compared to managing a franchise/business.
Investing in markets is, however, riskier than running a franchise, as they can be unpredictable. It is possible to lose money, especially when investments are poorly managed (although you can lose money through a franchise too). Therefore, market investments may offer less security compared to the steady income a franchise can offer.
Ultimately, each option is tailored to different wants/needs. Those looking to be in total control of their investment may want to look into becoming a franchisee, whereas those who want a quicker, less secure investment may wish to explore market investments.
Submitted by Luke Hatkinson-Kent