Skip to main content

How to Diversify Your Portfolio Investing in Franchise Opportunities


The glory of running a successful business is great, but it can be fleeting if you’re not opportunistic.

Perhaps the most infamous failure at business diversification occurred in the early 1980s when Xerox Corporation scrapped their groundbreaking new product commonly known today as the computer mouse. Ouch! Legend has it that the company feared the slight offshoot in their product line would cannibalize their existing paper business. There have been other rumors explaining the epic gaffe by the one-time industry giant. The moral of the story: Just because you’ve been successful in one area of business doesn’t mean you should overlook the possibilities of branching out.

You should consider a diversification strategy if you’re an entrepreneur, investor, or both. At least understand the different strategies, advantages and disadvantages, and what industry might provide the best opportunity for you.

What Are the Different Types of Business Diversification?

When most people talk about diversification, they’re thinking of their investment portfolio. Whereas business diversification involves the same concept— “don’t put all of your eggs in one basket”— it has some nuances.

One way to spread your eggs would be using different product baskets. An example would be Apple. They were already a super successful computer maker. Imagine if Steve Jobs never took his idea for a smartphone to his engineers. In 2007, the iPhone was unveiled, and the world has never been the same.

Another way to do this would be to put some eggs in various brand baskets. This would be akin to merging with another company within the same industry. Suppose you were already a successful auto insurance provider. How could you grow that success through company diversification? Perhaps you would look into buying another provider specializing in coverage for high-risk drivers.

A third option for finding new businesses could be getting into an entirely different industry. A snack food company might decide to invest in a trucking company. This might give them the advantage of decreased shipping costs for transporting their products. You could also go into an entirely unrelated area where neither business has anything to do with the other.

What Are the Advantages?

The primary advantage of diversification in business is that it acts as an economic buffer. Suppose you own a tax preparation service, and you have the opportunity to get into the landscaping business. You might consider it to protect your entrepreneurial brand since online accounting software might get so good that your primary business will become obsolete, while landscaping will likely always be there.

Another obvious advantage exists by simply adding more sales and revenue. The more money you can make, the more you can reinvest into other businesses, offering the possibility for additional streams of revenue. The true beauty is that there are no limits to your growth. If you’re an entrepreneur who knows how to start a business and make it profitable, you can expand your brand across many industries.

What Are the Disadvantages?

Have you tried the new cheeseburgers from Chik-Fil-A? No? That’s because they don’t exist. A big fear in diversifying is the possibility of a weakened brand image. Don’t try making burgers if you’re known for making delicious fried chicken. If you fail, your bad burger could result in less love for your chicken. The same rule applies if you try to add auto repair services to a successful auto coverage provider. If the repair service fails, it could impact your previously spotless reputation in your primary business line.

If we use the same insurance provider example, another disadvantage occurs if you start spending too much capital on the new line of business. Those expenditures could take valuable resources away from your primary service. If new, game-changing technology emerges in the auto coverage industry, you might not be able to afford the investment and subsequently may fall behind your competition. This could prove to be a costly disadvantage.

Why Are Franchises a Smart Option to Diversify?

An often overlooked possibility to broaden your ownership horizons is through franchises. Diversification with franchises is an intelligent option for a few reasons.

First, most franchises are service-based, which makes them recession resistant. Some of the most popular include fast food, haircare, child care, and automotive assistance. Because many consumers consider these businesses “must-haves,” a recession doesn’t affect their bottom lines the way it does for other companies.

Second, the same service-based model also helps franchises serve as a safeguard against inflation. When buying power is decreased due to this challenging economic factor, people take fewer risks with their spending. This means they’re more likely to choose a service with a brand name they recognize. People favor the proven product over the wild card an independent service provider offers.

Finally, they run relatively independent of the stock market. Although investment analysts will tell you that market correction happens and as long as you don’t panic, your investments will always come back, franchises rarely have a downfall.

Other reasons exist to make franchises an integral part of your business diversification strategy. But there is one option within the vast list of franchise opportunities that could provide the most benefit.

Is an Insurance Franchise a Good Alternative for Diversification?

Business diversification with an insurance franchise could be one of your best options. It’s a safe bet that most people will continue to want to protect their heaviest assets like homes, automobiles, boats, R/Vs, and more. With that in mind, the insurance industry seems like a no-brainer, safe bet for your business portfolio.

The right insurance franchise will also provide crucial support and resources if you’re new to the industry. You’ll have access to the best technology, training, customer service, and more.

If you want to explore insurance as an option for your business diversification strategy, contact Freeway Franchise at 1-877-822-3024 or fill out our quick online request form for more information. Our representatives are waiting to take your call and give you all the information you need to join our team today!


Ready to Open Your Own Freeway Insurance Office?

If you find the Freeway Insurance brand compelling and are looking for a flexible, well-supported business in a rewarding niche of the dynamic insurance industry, contact us.