If you ask people about their financial planning, the word “nest egg” will undoubtedly come up. Many view retirement planning as a race to build a lump sum of cash by the time retirement comes around. Don’t get us wrong – having a healthy amount of cash in the bank is admirable. However, saving is only part of the journey to future financial independence, and relying solely on a 401(k) may not be enough.
The fact is, idle money loses power over time. While saving up during your working years is important, without an active plan to grow that nest egg, the slow creep of inflation and distribution taxes can sap your spending power when you need it most. If you have plans to exit the workforce early or want to upgrade your lifestyle now, your money needs to be working at full capacity to make it happen.
What’s more: Taking a savings-only approach assumes the best-case scenario – that you will be able to keep working (and saving) long-term. But life happens and circumstances change. Your plan should allow you to retire as planned, but adapt if necessary.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Earn passive income, hedge against inflation, and diversify your portfolio through franchise investing with FranShares
Now for the good news: if you’ve been dutifully stashing cash in a lower-yield account, you are already well-positioned to upgrade your lifestyle and future-proof your finances. Turning your cash into cash flow ensures that your money can keep up – and continue to serve you – now and decades into the future. To do this, you need to put your money to work in recession-resistant, inflation-hedging investments.
Franchising, with its low volatility and excellent return potential, is among the best vehicles for hedging against inflation.
P.S. - Want to earn passive income from franchise investing? Learn how you can diversify your portfolio and hedge against inflation while earning passive income with FranShares. There are already more than 29,000 investors on the waitlist, so don’t wait! Join the waitlist today!
Four ways franchising protects your finances long-term
Franchise ownership has long been a favorite wealth-building tool for wealthy Americans. It offers the benefits of owning an income-generating business, while reducing the uncertainty of starting an independent venture.
Some key features of the franchise model make it an excellent option for diversifying and protecting your assets in the long term.
Wealth-building ROI potential
To beat the inflation “tax,” your investments need to outperform the average. The better your returns, the more cushion you’ll have against the inevitable increase in costs – especially during periods of higher-than-average inflation. With even high-yield savings accounts and CDs offering well below 2 percent interest, these vehicles keep you treading water at best.
The average return in a franchise business, from 25 to 160 percent depending on the industry, make it a superior option for building wealth and hedging against inflation. In addition, these businesses offer a relatively short time to profitability – as few as x years. With a short time horizon, you can begin to enhance your portfolio or use the extra income to enjoy more freedom sooner.
Other alternative assets (such as venture capital funds) may feature similar ROI potential, but they feature higher risk and hold times of five to 10 years. That’s a long time to wait for results.
The ultra-wealthy have used franchise investing to generate wealth for decades. Now you can too with FranShares.
Recession-resistant diversification
Hedging against long-term loss is one side of the coin; protecting against short-term pressure from recessions is the other. When a recession sends stock and bond prices lower, you need a way to preserve your assets. To soften the blow of these downturns, you can invest in assets with a lower correlation to the public markets.
Investing in franchises moves your money away from the volatility of the markets, which lowers your risk while producing steady, reliable income year after year. This can help you take advantage of good market conditions while smoothing the financial road during market contraction.
Franchises are seen as a recession-resistant investment for several reasons. First, they are often service-based businesses. When a business serves an essential consumer need – necessities like auto and home repair, personal care services, waste management, healthcare, or education – they can weather recessions more effectively.
Additionally, franchise businesses don’t “go it alone.” They benefit from a proven method of management and operation, partnered with a franchisor who has a stake in their success. This extra layer of support can help franchise owners navigate tough economic times.
Learn more about how you can diversify your portfolio with franchise investing through FranShares.
Reliable hedge against inflation
Inflation isn’t inherently “bad”; a normal level of inflation is a consequence of a growing economy. But to improve your spending power, you need to put your money on the right side of the equation. Hedging allows you to avoid the pinch of higher-than-normal inflation periods, and even use them to your advantage.
Because franchises are goods- and service-based, they offer some insulation against inflation. As the cost of goods and services rises, business owners can increase prices accordingly. Because franchises serve essential industries, you will continue to see customers come through the door despite inflation. In some cases, revenue for these businesses may increase during times of increased inflation.
Real assets are the best inflation hedge. Learn how you can use franchise investing to hedge against inflation with FranShares.
Lower-risk business model vs. traditional start-ups
Starting a business is a great way to take control of your financial future. It allows you to build a secondary income stream and hedge against inflation. It’s also a major undertaking, requiring a business concept, a strategic plan, and an understanding of how to operate and scale.
Franchise businesses lower this barrier to entry. They run according to a well-established franchise plan with marketing, operations, and financials carefully laid out. While they do require managerial expertise, the proven structure can help business owners avoid “reinventing the wheel.” This can lower the risk for new entrepreneurs.
Why don’t more people invest in franchises?
While franchise investment can help you create future-proofed finances, the traditional franchise model is not a fully passive asset. Often, the franchisors who benefit most from this model already have considerable financial means to run the organization semi-passively.
For the everyday investor, having the upfront capital to invest is only part of the decision – several other factors come into play when considering this alternative asset.
Running a franchise takes time
As with any business, becoming the owner-operator of a franchise requires a time investment. While you may not be working behind the counter, owners are responsible for the administration of the business, such as hiring, payroll, customer service, ordering, and scheduling. Your location’s success will depend on the time you put into the business.
While some franchisees hire experienced in-house managers or external teams to handle the day-to-day operations, in this scenario there is still time spent “managing the managers” in order to ensure things run smoothly. This semi-absentee method of franchising can eventually offer you more time freedom, but it doesn’t happen overnight. Taking an outsourced management approach also increases your cost of operation and affects bottom-line profitability.
Management experience is essential
If you’ve never managed people and/or processes, franchising can present a steep learning curve. In addition to general business management experience, the most successful franchise owners often have previous experience in the model, sometimes as location managers. In order to successfully run and scale a franchise operation, you’ll need to develop those skills.
Picking the right franchise can be challenging
Once you’ve settled on franchising as the right opportunity for you, the next step is choosing the right franchisor to partner with – and there are thousands of franchise brands in the United States. Each has different fees and start-up costs, expected revenue, time to profitability, and available territory. Potential franchisees need an understanding of financial disclosure documents (FDDs) to evaluate potential partners and understand the costs and challenges of starting up a location.
Earn passive income through franchise investing with FranShares.
A new way to franchise with FranShares
The obstacles to franchise operation have long kept everyday investors out of this important asset class. Many don’t have the time to invest in traditional franchises, and/or lack the industry knowledge necessary to make the best investment choice.
FranShares is changing the way people invest in franchises. We’re giving accredited and non-accredited investors a platform to invest in professionally managed, fully passive franchise opportunities. This fractional approach – which has helped retail investors diversify into stocks, wine, art, and other wealth-building alternative assets – can now enable anyone to bring the power of franchising to their investment plan.
Our expert teams vet and select established, profitable franchises, build out a network of locations in highly desirable markets, and enable you to invest in a portfolio of high-performing franchises fee-free, with investments starting at $500. Our platform allows investors to diversify their holdings by industry and geography, and realize recurring returns on their investment with shorter holding periods. As co-investors in each fund, FranShares is committed to building highly profitable franchise networks and staffing them with the best management teams in the industry.
Our next fund is opening shortly. If you’re ready to harness the power of franchising to enhance and protect your financial future, join our waiting list.
Disclaimer
This content was provided by FranShares. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.
-
Visa Is the Worst Dow Stock Wednesday. Here's WhyVisa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
-
Another Analyst Moves to the Sidelines on Tesla Stock After EarningsTesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
-
Confused by Annuities? Making Sense of the Different TypesMany investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
-
Talkin' 'Bout My Generational Wealth: Baby BoomersWith retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
-
How to Avoid a Big Hassle if Your Financed Car Gets WreckedHow an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
-
Estate Planning Strategies to Consider as Election NearsAre big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
-
How to Get Your Money's Worth From Your Financial AdviserA good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
-
Think of Prenups and Postnups as Financial Planning ToolsThese contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
-
Congratulations on Your Raise: Three Things to Do With ItWe're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
-
Check Off These Four Financial Tasks to Finish 2024 StrongThe new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
