The decision to buy a franchise is often a hedge against the uncertainty of starting a business from scratch. Much of the work that goes into designing the atmosphere, targeting your desired demographics, and marketing to them is done for you. If you choose a good franchise, your brand identity will already be well known and people will know at a glance what business you are in and will (hopefully) have a positive reaction.
In
return for all of the work that the parent
company has put into making your franchise
successful, you pay a start-up franchise fee
and a percentage of the profits.
Essentially, by opening a franchise you
become a partner (albeit a minor one) in the
company. This partnership means that the
parent company's fortunes directly affect
your franchise. In this way, your fate is
not entirely or directly under your control.
Franchise fees vary with the franchise. Brands that are recognized worldwide are obviously going to be more expensive than brands a notch or two down. As with any other investment, if you buy your franchise at just the right time and the parent company experiences an unprecedented period of success, you can enjoy some of the fruits of that. People buying franchises after you will likely have to pay much more than you.
Buying a Franchise with an
Self-Directed 401k
Franchises are sometimes included options
for traditional IRAs but more often than not
you need a self-directed IRA to take
advantage of a good franchise investment. A
major concern of buying and operating a
franchise with an IRA is the payment of
set-up and operating expenses. All expenses
must be paid with IRA funds so you need
enough cash in your account to do so.
Without checkbook control of your IRA, you
can also be subject to fees every time you
pay an expense