Looking to build wealth long-term and minimize investment risks? Here’s what you should know about portfolio diversification.
Diversification has become an increasingly important strategy for savvy investors.
Rather than putting all of their eggs into one basket, investors are looking outside of traditional markets to spread their wealth.
One asset class that’s caught the eye of many would-be investors? Franchising.
More specifically, breakfast franchises.
Breakfast franchise opportunities offer investors a fast-growing industry and consistent returns year after year. Here’s why franchise investing should be part of your long-term financial portfolio.
Table of Contents
- Why You Should Portfolio Diversify Today
- Why Is the Breakfast Industry Growing?
- How Does a Breakfast Franchise Opportunity Compare?
- Evaluating Your Breakfast Franchise Opportunity
- Wrapping It All Up
Why You Should Portfolio Diversify Today
If there’s one thing we can guarantee, it’s that the economy will continue to remain uncertain.
But with uncertainty comes risk, especially when it comes to your investments.
That’s why portfolio diversification has been a hot topic among investors as of late.
Simply put, when you diversify your investment portfolio, you spread your assets across various markets. This lessens your risk if something were to go south.
Franchising is a great example of portfolio diversification.
Instead of investing in the stock market and hoping your stocks don’t plummet overnight, you can invest in a franchise business.
You’re putting your money towards a physical location that provides services or products to paying customers every single day. Plus, the global franchise industry is projected to grow more than $1.6 trillion between 2022 and 2027.
Why Is the Breakfast Industry Growing?
Alright, let’s dig deeper.
The breakfast industry is booming, especially the breakfast restaurant category.
Revenue has been increasing at 7.5% annually for the last five years. This growth rate has even surpassed many other traditional restaurant industries.
So why is the breakfast industry growing?
There are many possible reasons for this. But one of the biggest factors stems from the shift to remote work.
With more flexibility in the morning, people aren’t forcing themselves to eat breakfast at home like they use to. Instead, more people are eating breakfast outside of their house than ever before.
In fact, over 65% of American adults say breakfast is their go-to meal when eating at restaurants.
Eating breakfast out also benefits restaurant owners because:
- There are lower operating costs. Breakfast typically means shorter hours which means less money spent on labor and utilities.
- Shorter menus make it easier for employees to learn their craft. There’s also less room for error when making meals.
- Breakfast crowds are consistent. When you own a breakfast restaurant, you know customers will come because people eat breakfast every day.
If you’re considering a breakfast franchise opportunity, these benefits equate to stronger unit economics and more reliable revenue for your investment.
How Does a Breakfast Franchise Opportunity Compare?
When comparing investment opportunities, it’s important to take a look at how your options stack up.
Here are some things that make breakfast franchises stand out from your average restaurant investment.
They offer better hours.
Breakfast franchises typically operate between the morning and early afternoon. There are no late nights spent cooking and cleaning. And no weekend dinner rushes.
This makes it easier to hire and retain quality employees.
The business model is simpler.
Breakfast restaurants have less complicated menus than dinner restaurants. Think about it. Breakfast foods are typically simpler to make. They use less ingredients and have quicker prep times.
Not only does this improve your bottom line at the unit level, but it also allows managers to focus on other areas of the business.
Customer traffic is consistent.
Let’s talk about why breakfast franchises are a smart investment…
Breakfast is a meal that everyone eats daily. Sure, some may skip it from time to time. But for the most part most people eat breakfast every day.
This creates a built-in customer base that visits your restaurant each morning.
You don’t have to guess if customers will come and eat at your restaurant. They will.
Evaluating Your Breakfast Franchise Opportunity
Thinking about becoming a breakfast franchise owner?
If you’re like most shoppers, you know that not all investments are created equal. Here are three things to look for when evaluating your investment opportunity.
Understand the unit economics.
All franchisors should be transparent about their unit economics. Ask for an Item 19, which is a section of the Franchise Disclosure Document that showcases revenue and cost information for current franchise locations.
Some key numbers to pay attention to include:
- How much volume does each unit generate?
- How much does it cost to open a franchise location?
- What are royalty fees and marketing contributions?
- When can franchisees expect to turn a profit?
Assess the brand’s positioning.
Just because the breakfast industry is growing doesn’t mean your franchise will. When evaluating your franchise opportunity, consider the brand’s positioning.
Many breakfast concepts are jumping on the health food train. That’s because consumers are demanding healthier breakfast foods that use fresh ingredients. Restaurants that take advantage of this trend have been able to charge more for their food.
Those selling traditional breakfast foods will likely have a harder time staying afloat.
Do your homework on support.
Franchise support can make or break your business. That’s why it’s important to look into a franchisor’s support system before signing any documents.
A good franchisor will offer support before and after you open your doors. This includes training as well as operational and marketing support.
Don’t be afraid to reach out to current franchisees and ask them about their experience with the franchisor. They can offer insights that you won’t find anywhere else.
The Health-Conscious Consumer Shift
We briefly touched on this earlier, but let’s take a deeper dive into consumer trends.
Americans are demanding higher quality breakfast foods that are made with fresh ingredients.
That means franchise concepts that focus on healthy breakfast meals will attract more customers. Not to mention, customers will spend more on meals that they perceive as healthy.
Fast casual breakfast franchises that offer healthier options have been performing better than fast food restaurants. Customers are willing to pay extra for food that “tastes better.”
If you want your franchise to stand out from the crowd, consider investing in a franchise that matches the direction the market is heading.
Wrapping It All Up
If there’s one thing you can count on… It’s that uncertainty will continue to surround our economy.
However, you can reduce your risk by diversifying your investment portfolio. And if you’re looking to invest in a new asset class, consider investing in a breakfast franchise.
Here’s a quick recap:
- Breakfast industry revenue has continued to grow year over year
- Breakfast franchises have lower operating costs.
- Consumers are shifting to healthier breakfast options.
- Franchisors that offer strong support to their franchisees will benefit in the long run.
Want to learn more about what it takes to own a franchise? Visit our learn center to access FREE resources on franchise ownership.
