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Regardless of business model, industry or motivations, it’s no secret that most aspiring business owners are interested in entrepreneurship to make money. But there are a plethora of options available when trying to develop your wealth portfolio. After all, anyone who is considering business ownership has likely made money in other ways — traditional jobs, passive investments, real estate, private investment syndications through friends and family, private deals or being a partner in independently owned businesses.
One option for consideration lies in franchise ownership. In fact, franchises can behave like these income streams listed above but might offer additional benefits. Let’s explore how owning a franchise business stacks up against four alternative income streams: a corporate job, real estate investments, non-franchise business ownership and passive investments.
Related: Which Franchise Model Is Right for You? Here’s How to Choose
1. Franchise vs. Corporate job
Most franchise owners have a history of employment, often in corporate America — and it’s a major asset, providing experience and business acumen. In terms of the number of work hours, ability to work with a team and management skills, owning a franchise is comparable to a corporate position, with key differences. Primarily, the differences stem from four major pain points that impact corporate employees:
- Autonomy: It can be difficult to control your destiny (outcomes) in a corporate position, with many factors outside of your control.
- Flexibility: In a corporate position, you are often working on someone else’s schedule, making it harder to manage your personal life.
- Purpose/passion: If your job doesn’t provide fulfillment or you aren’t satisfied selling widgets, it can be difficult to maintain an executive focus.
- Financial security: Corporate positions used to be the safe and secure path to building income and wealth; however, in the modern economy it becomes risky as you approach middle age and you’re still in middle management.
In these four areas, franchise ownership offers alternative options that allow for more control both on a broad scale and in day-to-day life.
2. Franchise vs. Real estate investments
Similar to investing in real estate, franchising requires a certain level of upfront costs and investment. Like rental properties, owning a franchise is a big responsibility that will require upkeep, ongoing costs and hands-on management.
However, franchising can often have a better return on investment than real estate. Consider a salon suite franchise in which beauty professionals are renting suites from you to run their businesses. In this scenario, you are responsible for the initial investment, leasehold improvements and filling the salon with beauty professionals. But after that point, there is not much for you to do on a day-to-day basis
Similar to investment real estate, your time in many franchise models can be very leveraged, but unlike real estate, you are providing a unique service with higher barriers to entry, typically creating stronger returns on investment. After the business gets off the ground, you’ll typically enjoy high-level oversight and fewer day-to-day operations.
Related: 7 Essential Questions to Ask Yourself Before Starting a Franchise
3. Franchise vs. Non-franchise business ownership
Whether you own a franchise or a non-franchise brand, business ownership is business ownership, right? Wrong.
Depending on your specific goals for owning a business, each of these models has a variety of options to consider. Primary differences include the level of control, the finances and time leverage available, branding and marketing say-so, research and development opportunities, staffing and training practices and shared industry knowledge.
Franchise ownership means you are starting a new business, but not from square one. There is a tried and true framework in which to operate. For the right candidate, this is an ideal jumping-off point. However, if you desire control over the concept and granular details, then a non-franchise business may be a better fit. Just remember starting a business from scratch takes a lot of time for things that don’t generate revenue (logo, employee manual, back office set-up, etc). If you take the business-from-scratch approach, make sure you are prepared for a long ramp-up period.
4. Franchise vs. Passive investment portfolio
No business is truly passive — if you want truly passive income, then consider buying stocks and bonds. While there are franchises that are passive, they take significantly more capital (consider a hotel chain). Of course, truly passive franchise models are not within most realistic budgets.
That said, there is a middle ground. Successful franchise owners often see the time spent operating and managing the business drop off over time. Most franchise models can eventually be run by a general manager rather than the franchise owner. While it may have to be full-time at the beginning, franchise owners who have built their operations platform can grow to become semi-passive over time.
If you are in the process of evaluating your portfolio and find yourself seeking alternative options, then it’s worth considering franchise ownership. By comparing franchises alongside other more traditional money-making avenues like a corporate job, real estate investments, non-franchise business ownership and passive investments, you will be able to make the best decisions that match your professional goals.
At the end of the day, it’s important to know your options to chart the best path forward. Who knows? You just might discover your next big career move.