This type of ownership will give you an arm's-length control. It allows you to treat it as an investment and not a lifestyle change. While you own the business, you hire managers to deal with the daily operations. While this leads to higher labor costs, you can have more freedom and scalability.
This is the best of both the owner/operator and absentee ownership models. With this ownership type, you have help with the daily operations while also having the time to have a day job and support the business financially. Many former athletes and other professionals choose this form of ownership after they can operate the business while pursuing other opportunities or spending more time with family.
You also need to consider how many units you’d like to buy. You can choose:
This is the classic franchise model and is great for novices trying to make it in the business world. With single-unit ownership, you can focus on one location. Single-unit ownership is especially beneficial if you are new to franchising. With one franchise store, you can focus on running it as well as you can and getting a better sense of how the franchise business operates. Since you only have one location, your franchise cost will be lower, as well. The franchise cost goes up as you own more locations.
You may decide to own multiple units of a franchise in a specific area. Usually, a franchisor will give you a discounted rate per unit. With this type of ownership, it is common for the franchise owner to be the owner/operator of their main unit while taking a semi-absentee ownership role of the secondary units. But as a franchise owner with multiple units, you have more to focus on and shouldn’t take multi-unit ownership lightly.
Area developers are similar to multi-unit owners but on a larger scale with more units encompassing a territory. The area developer is granted the right to open a certain amount of units by the franchisor.
A misconception about franchising is that fast-food restaurants are the only kind of franchise to choose from, but this is not true. The great thing about franchising is that there are franchise opportunities in any industry that you can think of:
Choosing a Franchise
Deciding to invest in a franchise really is exciting and life-changing. Before investing in a franchise business, it would be beneficial to speak with a Franchise Consultant. This professional knows how to buy a franchise and connects franchisors and aspiring entrepreneurs. The Franchise Consultant will consider your background, skills, and financial situation to determine if franchising is right for you. Based on their knowledge of how you own a franchise, the Franchise Consultant connects you to franchisors who align with your values and have an environment where you can succeed as a franchise owner.
Due Diligence Before Owning a Franchise
In addition to speaking with a Franchise Consultant, other important parts of the due diligence process include discovery day and franchisee validation. Entrepreneurs who want to open a franchise are invited to a franchisor's discovery day if they have what it takes to buy a business. During this event, which usually takes place at the franchise business’ corporate headquarters, you can question the franchisor and other leadership team members. Ask a few specific questions in order to get the most out of the experience.
Franchisee validation is also a good way to finalize your decision to own a franchise. As a prospective franchise owner, you can ask questions to existing franchisees in the system. The questions that you ask them should be thought-provoking and asked several times to get a good sense of how a franchise business really works. If you still believe that owning a franchise will beat you and the franchisor after this process, then go all-in and follow the system.
Factors to Consider When Choosing a Franchise
With more than 790,492 franchise establishments in the U.S., you have to consider what you are looking for before investing in franchise ownership with a brand. What is the brand’s sales record? Is it within your budget? What are the franchisor’s marketing initiatives like? You should also consider the ownership model that you want (owner/operator, semi-absentee, absentee), and how many locations you can own (single, multi-unit, area developer). While it can be tempting to pick an industry (food, pets, beauty) that you’re passionate about, don’t make the mistake of discounting opportunities that don’t initially excite you. Do your due diligence by speaking with Franchise Consultants and attending Discovery Days.