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As an investor committed to responsible practices, it’s crucial to avoid concentrating all resources into a single investment avenue. Instead, a well-rounded portfolio that effectively balances risk and return is advisable. This philosophy extends to selecting companies for your business portfolio. But how can one navigate this selection process effectively? At United Franchise Group (UFG), we emphasize leveraging existing strengths when considering new business ventures.
The guiding principle is straightforward: invest in what you know.
When managed appropriately, success tends to breed additional success. After steering one company to profitability, you’ll likely find yourself seeking to replicate that achievement. Your newfound capabilities and insights may enable you to identify and capitalize on further opportunities that could enhance your business’s value. Leveraging your strengths can significantly simplify the journey toward success in subsequent ventures.
Related: Considering franchise ownership? Start exploring to find a tailored list of franchises that align with your lifestyle, interests, and financial capabilities.
Diversify within a category
As you construct a diverse portfolio, it is essential to remain aligned with the strategies that have previously driven your success. Focus on diversifying within your existing industry. For instance, a thriving restaurateur might consider expanding into other dining establishments while steering clear of unrelated sectors like grocery stores, which require different skill sets.
Moreover, avoid acquiring a company that is a direct duplicate of your own. If your primary business experiences a decline in enthusiasm, the repercussions may be doubly severe. If you run a discount supermarket, for instance, exploring options in gourmet markets may provide a beneficial variation.
Related: Discover the common factor among the leading franchises in 2025.
Trust your instincts — for now
While investment decisions should always be informed by objective reasoning, an intuitive approach can be beneficial in the initial stages. As you visit businesses as a customer, take note of what captures your attention positively. Let this intuition guide your preliminary exploration.
Consulting with a business broker can also be invaluable in assessing your choices. Identifying successful niches in your sector is key. UFG, for example, presents restaurant investors with options like our Greek food and charcuterie franchises, which appeal to the health-conscious demographic and those seeking novel snacking experiences. Similarly, real estate professionals might find value in co-investing in coworking spaces, catering to the growing demand for flexible work environments.
Related: After years of effort, this couple is realizing their entrepreneurial aspirations and building generational wealth. Here’s how they accomplished this.
Now engage your analytical abilities
Once a potential business type is identified, it’s time to apply critical thinking to evaluate your options. Seek expert insights on evaluating crucial aspects such as the company’s financial state, consumer demand, and operational efficiency. If you’re working with a corporate team, enlist members from various functions like sales, operations, management, and accounting to facilitate thorough assessments. It’s vital to engage with the founders of the business you’re considering; ensure you’re aware of their intentions post-acquisition. Don’t hesitate to ask difficult questions, and if anything feels amiss or if discrepancies arise, consider walking away from the transaction.
Many aspects of this due diligence process can be simplified when investing in a franchise. Franchise brands often provide established systems, strong brand recognition, and if chosen carefully, valuable marketing and training support.
Additionally, the interconnectedness of franchise brands can be a crucial element to consider. Evaluate how your businesses could share resources. Determine whether they should collaborate or remain completely independent.
Related: Six compelling statistics regarding women in the franchising sector.
Insights from experience
Reflecting on my four decades in the business acquisition landscape, I’ve gathered significant insights into the dynamics of buying and selling brands:
The advent of private equity in franchising has shifted the landscape considerably. While beneficial for certain brands, it poses risks for others. It’s wise to approach these partnerships cautiously, particularly when ceding majority control. Even holding a minority stake can introduce complexities. Guidance from those with prior experience in this process can be invaluable.
Regrets often accompany business decisions; mistakes are an inherent part of the entrepreneurial journey. Although UFG has navigated numerous challenges in transactions, we have consistently found solutions. Regardless of past obstacles, it’s important to maintain a forward-looking perspective and continue progressing — and you should adopt the same mindset.
Related: This company aimed to revolutionize drive-thrus using AI — but the secret to its technology? Human involvement.
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