Part 2: Tending the Farm
While franchise ownership is definitely not usually a walk in the park and has its fair share of challenges, for those entrepreneurs who are capable of handling the challenge the benefits can be more than worth it – I learned this from first-hand experience growing up the child of a franchise operator in the Atlanta area. Not only do you get to earn money while being your own boss, you learn about business operations within the industry you’re working in while most likely becoming an industry expert as well. Not to mention, the “free food” if you own a restaurant or the heavily discounted improvements in your home if you own a service-based home improvement franchise (for example, flooring installation or in-home painting services). And for those who are really skillful or lucky, the franchise can even serve as a passive or semi-passive form of income.
While all of these perks and benefits seem nice, let me once again reiterate – franchise ownership is no walk in the park. In order to achieve the aforementioned results, a franchise owner or operator must pay attention to detail and make sure to maximize utilization of all their resources. Not only does the franchisee need to be a great operator, they usually need to spend a significant amount of capital in order to begin operations in the first place – in many cases franchisees are completely dependent on their franchise profits to make a living – an added risk to franchise ownership.
Despite the challenges, I fully encourage people to follow the American Dream and turn their hobby or interest into a source of income – there is probably a franchise for it!
The American Dream
The American Dream, as defined by Wikipedia, is the “national ethos of the United States, the set of ideals in which freedom includes the opportunity for prosperity and success, as well as an upward social mobility for the family and children, achieved through hard work in a society with few barriers.” From immigrants to children of multi-generational millionaires, the American Dream remains a driving force behind American innovation. The willingness to take risks, in an economic environment where it is easier and safer than anywhere else on the planet to open and operate a turn-key business – is one of the main reasons why the United States is where the most franchises exist (approximately 800,000 a little over a year ago), though many other developed nations are catching up.
The ability to own a business and to “become your own boss” is another one of the main reasons to make a move into franchising. The freedom to manage your own life and decide when to work is definitely an exhilarating feeling. Entrepreneurship provides income with no cap; limitless potential. And when it comes to being an entrepreneur, it is much less risky for someone to invest into a proven, turnkey business. To put this into perspective, it is significantly easier and less risky to buy a McDonald’s on a busy road than it is to convince people that your new software is going to change the world (though I highly encourage entrepreneurial software businesses as well – without them we would never have had Microsoft of Apple); the McDonald’s is almost guaranteed to make money whereas the software company could (and statistically most do) go belly up in less than a year of existence. While most entrepreneurs do work well over the typical 40 hour work week, their business – especially a franchise business – has plenty of potential to be passive, which we will touch upon later.
Subject Matter Expertise, Benefits, and Community Impact
Many business owners choose to open up a business in an industry that they have previously worked in or are currently involved in. This usually makes them great candidates for franchise ownership. Many QSR franchisees have spent time in the hospitality industry before making the switch to ownership – for example my father was an executive at a large hotel company before opening up a restaurant. His expertise in the hotel industry allowed him an easy transition into franchising, where he was more successful than ever. Many owners of home improvement franchises spent their lives in the contracting business, and some of those who are lucky enough get to bundle in other services as well as the original service provided by the franchise. Being a franchisee, there are definitely some great benefits – free food being one of them! But in all seriousness, being a franchise owner has many more benefits: access to company information and data, access to industry and company events (which further increases subject matter expertise), being handed a turnkey business model without having to worry about creating a business from scratch, exposure to top-tier professionals in the industry, and a chance to build relationships with local municipalities/organizations and communities in general – which leads to the next topic.
You are helping the local economy simply through the act of business ownership. Not only do you provide local jobs, you more likely than not perform your revenue producing activities within the community – which helps even more; let’s observe the potentially compounding effects: Whether it’s a local gym that keeps people in shape, a restaurant that leaves smiles on people’s faces, or a home improvement franchise that builds nice pools (which raises the value of people’s homes – this could be an article on its own explaining compounding effects of home prices in a micro and macro-economic environment, which we won’t delve into today but feel free to reach out to me for a discussion about this), the social aspect and benefits make a reverberating impact within the respective community of the business. A local business owner also has the ability to establish relationships with their local municipalities and organizations. Supporting the local high school football teams by providing their pre-game meals, or establishing a good relationship with the permitting department can go a really long way when it comes to having a less stressful life as an entrepreneur. For example, my father recently catered to local hospitals and police stations under the Checkers and Dunkin’ brands during the covid-19 crisis (my father pictured on the right) as a way of saying “thank you” to some of the local heroes in a local community.
For those who are able to master the art of operating a small business, or for those who have been lucky enough to have good management or strong systems in place, franchises have the ability to provide business owners a passive or semi-passive form of income. If a business is well-run, this can lead to scale and as an effect economies of scale, where a franchisee has the potential to see their margins sizably increase. While all investments need to at the very least be monitored, there are ways to make your investment more “hands off”. As stated earlier, strong management or a strong system is key to success in the industry. What separates great franchise operators from average ones are their management strategies and attention to detail. Everyone is handed the same system, however it is up to each individual owner to refine the system and optimize it accordingly. I have seen owners give their general or top managers and equity stake in the business on top of their salary, giving them skin in the game which at the same time creates more accountability as the manager’s life outside of work is now dependent on their performance – managers love this highly synergistic opportunity as it helps them move up in the world, while owners can rest assured that their business is being taken care of by someone who is also depending on the business profits for their livelihood. One of the only, if not the only methods of completely passive franchise ownership with a low barrier to entry (meaning you don’t have to spend tens or hundreds of thousands of dollars to invest – just a few hundred) would be to invest in franchises through us, FundingFuel.
And course one of the most important topics – one of the primary motivators for franchise owners – is obviously the financial rewards. Through scale, it is very possible to make millions of dollars in the franchise industry. In terms of earnings, there is an incredible variance. Franchise owners can earn $50,000 or less per year (don’t forget many of these people own a franchise as a side business or secondary source of income), while Chick-fil-A and McDonald’s franchisees can expect to earn well over $100,000 a year from just a single location. Income is based on the number of units and the industry one decides to open a franchise in.
While it is definitely not easy, a savvy individual is more than capable of providing for their family or even becoming wealthy through franchise ownership. Are there risks? Absolutely – someone who starts a franchise can lose their entire investment – which can be well over a million dollars depending on the concept. Yet a franchise is less of a risk than a startup, because a franchise is a proven, turnkey business model. For those who are very disciplined, determined, and ready to take the risk for themselves, their family, and community – I would highly recommend looking into franchising a brand you are passionate about and making a difference for your neighbor.
However, if you would prefer to keep your investment more on the passive side, FundingFuel can help you with this. You can reserve your spot on our waitlist to get exclusive early access to fractional share franchise deals here.
- My father’s 2 decades of experience as a multi-unit QSR operator and my childhood/young adulthood spent consulting franchise operations – nothing better than boots-in-the-ground experience