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Regardless of business model, industry, or motivations, it’s no secret that most aspiring entrepreneurs are interested in entrepreneurship to make money. But there are plenty of options available when looking to develop your wealth portfolio. After all, anyone who is considering business ownership has likely earned money in other ways: traditional jobs, passive investing, real estate, private investment syndication through friends and family, private deals, or being partners in businesses independently owned.
One option to consider lies in franchise ownership. In fact, franchises can behave like the income streams listed above but could offer additional benefits. Let’s explore how owning a franchise business compares to 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. Franchising vs corporate work
Most franchise owners have a history of working, often in corporate America, and is an important asset, providing experience and business acumen. In terms of number of hours worked, ability to work as a team, and management skills, owning a franchise is comparable to a corporate position, with key differences. Primarily, the differences arise from four main pain points that impact company employees:
- Autonomy: It can be difficult to control your destiny (results) in a corporate position, with many factors out of your control.
- Flexibility: In a corporate position, you often work on someone else’s schedule, making it more difficult to manage your personal life.
- Purpose/Passion: If your job doesn’t fulfill you or you’re unhappy with selling widgets, it can be difficult to maintain an executive focus.
- Financial Security: Corporate positions were the sure path to building income and wealth; however, in the modern economy it becomes risky when you approach middle age and are still in middle management.
In these four areas, franchise ownership offers alternative options that allow for greater control both on a large scale and in everyday life.
2. Franchising vs. Real estate investments
Similar to investing in real estate, franchising requires a certain level of upfront costs and investments. Like rental properties, owning a franchise is a big responsibility that will require maintenance, ongoing costs and hands-on management.
However, franchising can often have a better return on investment than real estate. Consider a salon suite franchise where beauty professionals rent 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’s not much to do on a daily basis
Similar to real estate investing, your time in many franchise models can be highly leveraged, but unlike real estate, you are providing a unique service with higher barriers to entry, typically creating higher investment returns. After the business gets off the ground, you’ll typically enjoy high-level supervision and fewer day-to-day operations.
Related: 7 Essential Questions to Ask Before Starting a Franchise
3. Franchising and non-franchised business ownership
Whether you own a franchised or non-franchised brand, ownership of the business is ownership of the business, right? Wrong.
Depending on your specific goals for owning a business, each of these models has a variety of options to consider. Key differences include the level of control, finances and time available, branding and marketing, research and development opportunities, staffing and training practices, and shared industry knowledge.
Franchise ownership means you are starting a new business, but not from scratch. There is a tried and true framework in which to operate. For the right candidate, this is an ideal starting point. However, if you want control over the concept and granular details, a non-franchise business may be your best bet. Just remember that you need to start a business from scratch Very of time for things that don’t generate revenue (logo, employee handbook, back office setup, etc.). If you take the business approach from scratch, make sure you’re prepared for a long ramp-up period.
4. Franchising vs. Passive investment portfolio
No business is truly passive: If you want truly passive income, consider buying stocks and bonds. While passive franchises exist, they require much more capital (consider a hotel chain). Of course, truly passive franchise models don’t fit into the most realistic budgets.
That said, there is a middle ground. Successful franchise owners often see the time spent operating and managing the business decrease over time. Most franchise models can eventually be managed by a general manager rather than the franchise owner. While it may have to be full-time at first, franchise owners who have built their own operating platform can grow to become semi-passive over time.
If you are evaluating your portfolio and find yourself looking for alternative options, then franchise ownership is worth considering. By comparing franchising to other more traditional avenues of income such as a corporate job, real estate investing, non-franchise business ownership, and passive investing, you will be able to make the best decisions that match your career goals.
At the end of the day, it’s important to know your options to chart the best path forward. Who knows? You may discover your next big career move.