December Is The Best Month To Invest In A Franchise

Pumpkin Spice Latte season is here. Consumers have started their holiday shopping and are bundled up for the colder weather. The interesting note is that this time of the year is also the very best time to invest in a franchise to grow your portfolio.

While most people are distracted there is a core group of business owners and future business owners that use this time at the end of the year to seek out, investigate and purchase a nationally branded franchise.

What makes this time of the year so special? If you have had a good year in your job or in your business then you have cash that you will have to pay taxes on unless you apply a business or other expense as a deduction against it. Franchise fees and other costs associated with investing in a franchise are business expenses.

So the financial benefit is very clear but what other benefits are there?

When looking at very active franchise brands much of the year you will find that the development team can be very distracted with all of the people that they have to educate about their franchise opportunity. Additionally, discovery days can be very full and getting documents and contracts can also take added time because of the demands on the system. At the end of the year there are fewer candidates who aren't distracted with family and holidays. You will get more time and attention from the franchise development team of any brand that you look at.

Now, it is very important to remember that the franchise development teams will also be distracted with the holidays so the earlier you get into an investigation and the faster you move the process along the easier it will be at the end of the process to approve the deal if you like it.

How can you move most quickly and efficiently into and through the process? If you are just starting to begin your search on Google or another search engine then it will take a while to work through potential targets and choose the brands that you want to begin to investigate. In a perfect world, you will find a way to expedite that process and very quickly get to brands that perfectly match your model without spending a lot of time looking at brands that don't fit you.

For the past 20 years we have worked with existing business owners and executives in the fall to help them identify a target franchise and evaluate that franchise with eyes towards completing an acquisition before the end of the year. While spring is definitely our busiest season, fall comes in a close second. I am already seeing emails and phone calls from proven franchise owners that want to invest their profits from this year before they pay taxes on them and keep growing their portfolio.

They call us because we shorten the time to get in front of the right franchise brands, and often find them opportunities they would not have found on their own.

One of my favorite questions has always been “What's next?”. This question comes from my past candidates who are franchise owners who when they reach out ask what's next to grow their portfolios. One of the biggest compliments I ever receive is when past candidates come back to work together again. Some of those candidates have been coming back for nearly two decades!

But at the same time candidates from corporate America who have had good years in their jobs come in and the question I wish they would ask is “What's first?”. Whether or not they asked that question that is exactly what they're here for. They are looking for a career transition, insurance against pay gaps or added revenue in addition to their salary to make their retirement even better.

Wherever the candidate comes from, their goal at this time of the year is to have an expense that mitigates taxes on this year's income. While I'm not a tax adviser I can say that there is definitely a benefit to having expenses and deductions when you complete your taxes.

So what would a new franchise owner write off? Their franchise fee would be the first expense they would look to as a deduction against their income. The benefit to that expense is that it's relatively large and you can get to it pretty quickly. A couple months, even one month, is plenty of time to evaluate a franchise if you start by looking at the right ones, the brands that fit you. We have seen candidates buy franchises after as little as a 2 week investigation.

For two decades we have had our radar that watches the entire industry and looks for both top performing franchises and watches the moves of franchise executives between brands to gauge were the best places are to find growth opportunities. Once we understand the candidate we know which of those brands they will best fit into and employ their skills.

What other expenses might you be able to put on the books for this year against your taxes?

Many franchise brands have marketing programs with a predetermined spend that you can often prepay this year instead of waiting until next year. If you will need to purchase equipment you may be able to cover the cost or at least the down payment on that equipment this year. You may also find that there is technology that you could pay for this year even though it will be delivered next year. And there may be other expenses that you can identify and prepay before you go to training or open the business in the coming months.

Of course, there will be expenses associated with starting your business that you'll be able to write off next year. Those may include leases, build out, supplies and inventory. Additionally you will have staffing cost marketing costs and other expenses that are paid for at the time.

All of these expenses could be deducted against next year's profits as well, but a lot of candidates want to take them as early as possible.

When is the worst time to buy a franchise? It may just be the first week in January!

What will your success story be? Let’s go find it!

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