Are Virtual Franchises a Good Investment?

A virtual franchise might be the best path for you to become your own boss. More and more people are working and shopping and largely existing online these days. The world post-pandemic is not projected to look much different, causing many changes to the realities of business owners all over the globe. The brick-and-mortar business model appears to be a thing of the past as more and more companies move their primary business presence online.

Before the pandemic, only 5% of Americans worked at home. That number has jumped to 60% in 2020. This has changed the fabric of business ownership in unexpected ways and has opened up questions about the viability of online or virtual franchises as an investment and means to transition business presence to an online model.

Table of Contents

Are Virtual Franchises a Good Investment?

What are Virtual Franchises?

Benefits of Virtual Franchises

Being Your Own Boss

Working From Home

Flexibility

Cons of Virtual Franchises

Are Virtual Franchises a Good Investment?

Conclusion

 

If you are considering transitioning your business to an online franchise model or you are thinking about investing in a virtual franchise, read on to learn more about this option for your business structure.

What are Virtual Franchises?

The business model of a virtual franchise works a lot like a traditional franchise in many ways. You will still be partnering with an established business while working as your own boss as you run your unique location tied to the main business. This can offer up a lot of great support for your business model and help you to avoid the process of building a business from the ground up. Being tied to a parent company that offers brand recognition and that has already carved out space even in crowded markets can be a big help to you as a new business owner just getting your feet wet.

The difference between a regular franchise and a virtual one is that you will not have to open up a brick-and-mortar location and you will have additional flexibility to direct the course of your business needs in ways that are not possible with physical locations. This means that you will have more flexible hours, lower overhead, and many other perks that might not be available to you with a traditional franchise model.

There are many benefits that are offered by virtual franchises that might make them the perfect fit for your business needs in this new work-from-home reality. While not all virtual franchise models will offer each one of these benefits, you will likely be able to leverage most of them when you take over your own virtual franchise and start working in your dream job to be your own boss.

Benefits of Virtual Franchises

Virtual franchises enjoy many of the same benefits that working from home offers traditional employees. You will have added responsibilities and costs to consider if you choose to invest in a virtual franchise, but the overall benefits of this business model will likely outweigh these concerns.

Some of the benefits of virtual franchises:

Being Your Own Boss

You will benefit from the franchise model by being your own boss, even when you take up a virtual franchise. You will be able to determine most of the details of how your business is managed, designed and what kind of customer experience it will offer your consumers.

Best of all, you will not have to generate the business plan, name recognition, or branding element of the online business that you are purchasing. This means that most of the necessary time-consuming parts of business development are already handled.

You will enjoy the ability to determine how many staff you want to hire, and you can decide which hours that you want to keep, all from the comfort of your home.

Working From Home

Many people are coming around to realize the superiority of the work-from-home reality. No more having to eat vending machine food while sitting in a cubicle and getting caught up in office politics. You will be spared the daily commute as well as the costs associated with running and maintaining a physical business location.

This can mean that your running costs will be much lower than with other kinds of franchises. You may even be able to do most of the work from your own home without having to hire a staff of people to work with you!

Flexibility

This is another key benefit of the virtual franchise model. You will be able to decide when and where you work, and you can choose to have reduced hours on days that you need to attend to personal matters. This might also mean that you are no longer tied to normal business hours and you can work at night if that is your preference, or very early in the morning.

You will still have to consider the needs of your customers and employees if you are working an odd schedule, but the decision about your own hours and the days that you work will be up to you. This is a great benefit to all virtual jobs, and the virtual franchise model is not exempt from this!

·Great Work-Life Balance

You have probably always wished that you would have time to cook dinner for your family during the week, or that you could make it to the gym more often. Maybe you are tired of missing out on your kid’s sports events while you are at work.

When you own your own virtual franchise, you will be able to balance the needs of your family with the needs of your business. There are not many other business models that can offer you this benefit and you will be glad that you are no longer missing out on the good stuff in life.

·Low Overhead and Low Start-Up Costs

This is one of the best parts of the virtual franchising model. You may have to buy some unique software or get some new computer equipment, but you will be all set after that. You will not need to invest in a business location, lots of products and materials for your employees to use, or any unnecessary gadgets and gizmos.

You and your home office are all that you will need in most cases to get your virtual franchise up and running. This also equates to lower overhead all year, meaning increased profits for you as well.

Cons of Virtual Franchises

There are some downsides to this model as well, and you should be aware of them before you leap into a virtual franchise that disappoints you.

The cost of virtual franchises is still much higher than many people think it is. You will still need to have seed money to buy into a virtual franchise and you probably should make sure that you know exactly how much that money is before you get seriously involved in the process of buying in.

The other consideration that you need to keep in mind is that you do not actually own the entire business and you might not like the decisions that are made by the parent company. You will not be able to opt-out of all of the facets of your new business design and you might not agree with branding styling that changes over time.

There are many pitfalls when you are first starting out as well, and you have to be careful not to get caught up in get-rich-quick scams or sell yourself to the wrong entity that is not scaled sustainably. You will need to do your research before you invest in any business that you have not heard about before. You want to be sure that your virtual franchise does not suddenly become obsolete or connected with a failing parent company.

These kinds of pitfalls exist in other kinds of franchising, but some types of virtual franchises are more prone to these problems. Any franchise that deals mostly with technology, for example, will suffer from the potential to be supplanted by other more technically advanced companies that sell superior products and services. You will need to do some detailed market research before you jump into any of the more volatile virtual franchising opportunities that are out there looking for investors and partners.

Lastly, you may find that franchising is more costly to scale than you were hoping as well. Many people think that they can invest in their first virtual franchise and then have the money right away to buy more franchises. This is not likely to be the case and you will need to plan your finances carefully if you intend to invest in more than one franchise.

Are Virtual Franchises a Good Investment?

Overall, virtual franchises are often a great investment. They offer you so much in the way of reduced costs that many people who could never normally afford to get into a franchise are now able to do so with ease. There is still the matter of upfront investment, but these costs are far more realistic for many people than buying into a brick-and-mortar franchise.

The difference between franchising and just starting up your own online eCommerce business or other types of business is that you will be able to piggyback on the success of the parent company for brand recognition and established market position. You will not have to jockey for attention with other smaller brands and you will experience improved chances of making sales due to these benefits.

There are not many other business models that can offer this amount of reliability to entrepreneurs and people with established coding or web development skills will be well on their way to making it big in this space without any extra cost for advertising or website support. Being able to handle most of the work yourself is a boon to virtual franchising that cannot be offered by investing in a restaurant or another kind of franchise that will require that you hire staff and that you work with experts or repair people when things need to be fixed or amended.

Even the least tech-savvy person can learn to leverage an established online franchise with some help and a little research. There is much less to learn in many of these business models and you will have time to get your feet wet before you start thinking about growing your business and expanding some of your offerings or picking up a second franchise.

The other benefit that makes virtual franchises so profitable for many people is that they can be run alongside other franchises with relative ease. If you own restaurants, you might always be limited by your ability to actually get to the stores when you are needed. This can limit your ability to own more than one kind of business when you are working with brick-and-mortar businesses, but it does not affect your ability to branch out into other franchises that are virtual in nature.

In the virtual franchise reality, there is no limit to your ability to invest in new franchises other than your willingness to do the work and your ability to hire the right people to take on part of the workload. The rest is fairly easy when compared with owning physical locations that need your attention.

Conclusion

Many people talk about becoming their own boss or working from home but they never take the leap to make it possible. There were many more obstacles to this goal when only 5% of Americans worked from home. Now that the work-from-home reality is here to stay, there are so many more opportunities for people to go out on their own and get their own business started.

For all of the people who never thought that they would be able to work from home and own their own business, virtual franchises answer this need. There will surely be changes on the horizon for this kind of business and working from home may change or shift some in the post-pandemic world. However, all signs point to virtual franchises as being a great investment if you are ready to make the change to owning your own business and charting your own future.

 

Jonathan Hung, Angel InvestorAbout the Author

Jonathan Hung is one of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.

 

Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.

Jonathan developed his investing prowess as a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, to name a few startups he funded.

Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.