Franchise Ownerships Models: Which One is Right for You?
The idea of franchising or investing in a business might be a bit intimidating if you expect to be working through sleepless nights and long days. Well, we’re here to reassure you that it doesn’t have to be that way.
Believe it or not, you can invest in a franchise and be absent from your business. We’re not saying it is the case for all franchisees, but it is an option for business owners. The most important step to take is to figure out what you’re looking for out of this opportunity.
Are you willing to be involved in your business and be completely hands-on? Or, do you prefer to sit back and relax while the business operates independently?
Let’s discuss the different franchise ownership models as well as their pros and cons, to help you decide which one best suits your needs.
The Semi-Absentee Franchise Ownership Model
As the name suggests, the Semi-Absentee franchise model is ideal for those who are looking to benefit from an additional income while having minimal involvement with the business. A few of these types of franchises include boutique fitness centers or home services such as window cleaning or painting services.
Here are some pros and cons of this type of franchise model:
Pros:
• The most obvious reason, being almost absent while successfully making a profit
• The ability to keep a full-time job since you are not required to be a part of everyday operations at your franchise
• The ability to maintain work-life balance
Cons:
• The biggest consequence of a semi-absentee model is the risk of putting your investment and potential profit in someone else’s hand.
The Owner/Operator Franchise Ownership Model
This model means that as an owner, you’re at the store running day-to-day operations. You’re completely hands-on, and this franchise is your one and only job.
If you’re considering this model, keep in mind that you would need to put in a lot of effort to ensure your business runs smoothly and successfully.
Here are the pros and cons of an owner/operator franchise model:
Pros:
• Franchisors typically prefer franchisees who show interest in their business. Basically, they want to trust that you will be hands-on and highly involved. So, if you’re willing to put in the effort and be an owner/operator, you will have a better chance of being accepted as a franchisee.
• Your business will run the way you see fit. You’re completely in control of your business and are able to pick a team that will lead your franchise to success with your supervision.
Cons:
• Most owner/operator franchisee models require you to have a personal touch with your clients. Not all managers will have that passion.
• Work-life balance is questionable when it comes to this model since managers will be highly involved and hands-on with all business operations.
The Executive Franchise Ownership Model
This model is perfect for those who are franchising for investment purposes only. The franchisee owns the business but hires out all functions required to operate it, including day-to-day management.
Here are some of the pros in cons to consider when choosing this model:
Pros:
• No involvement at all from the owner. This can be beneficial to those who have full-time jobs or no passion for the franchise at all.
• A greater share of the profits. The success or failure of your business is largely in your hands, so you’re the one who will enjoy the bulk of the profits when your business is thriving.
• Flexibility and freedom. You can set your own schedule, take as many sick and vacation days as you want, without having to go through an HR department.
Cons:
• This model is business to business by nature. That means that as a franchisee, you will have to face up to senior business decision-makers and get them to sign up for your services.
• For some franchises, such as in accountancy, you may require certain qualifications as a prerequisite to becoming a franchisee.
You picked a Franchise Model, What’s next?
You picked the franchise model that meets your needs, congrats! Now let’s discuss the next steps. Finding the right franchise for you! What is the industry that you’re most passionate about? Do you have a good location scouted? Finding the right answers will ensure that you succeed as a franchise owner.
The first step to take is to determine your goal. After you narrow down your options, determine how much you’re willing to invest and start setting up meetings with franchisors.
Pick the Right LLC Structure for You
Picking the right LLC structure for your business will have a long-lasting impact on your franchise’s security and performance.
Of course, determining your short and long-term goals will help you make a better decision for your business.
While LLCs help limit personal liability, sole proprietorship puts your own assets at risk in case of legal trouble.
Not sure which structure is right for your franchise? Learn how you can make a wise choice by reading our article where we go in-depth about the pros and cons of LLC vs sole proprietorship as a franchisee.
To Sum Up
The great thing about being investing in a franchise is the flexibility and variety of options available to you. As we always mention, determining your goals and what you’re looking for in an investment will help you make better decisions.
If you have a full-time job and you’re looking at franchising with little involvement on your part, the semi-absentee model is perfect for you. If you’re looking at franchising as purely an investment opportunity, then the executive model is the right one for you. And, if you’re passionate about running your own business and are confident that you can put the time and effort in, picking the owner/operator model will ensure your business succeeds.
We hope our insights will help better guide your decision. Our team is ready to help future franchise owners set up a solid business plan. We will make sure your business saves tax money through expertly-crafted tax strategies for franchisees, and save time by eliminating all the guesswork.
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