Unlike traditional entrepreneurship, franchising offers two types of ownership options: hands-on or executive ownership. Hands-on ownership means working in the business, much as a traditional entrepreneur might (though with much more support). I usually refer to this type of franchise owner as an owner-operator: someone who both owns the business and runs the day-to-day operations.
Executive ownership is more of a hands-off role that involves working on the business. Executive owners typically focus on strategy or vision, financials, and growth. They hire one or more franchise managers to manage day-to-day operations.
So which type of franchise ownership is right for you?
That depends on your goals, your life stage, and more. Let’s look at how the options break down.
Hands-on Ownership
Hands-on franchise ownership is a full-time job. It most closely matches what people usually envision as self-employment. In a hands-on role, you own the business, but you also work in it. When you first launch your business, you’ll probably do all the work. If it’s a carpet-cleaning franchise, for instance, you’ll actually drive the truck and clean the carpets. You’ll also win new clients, send out invoices, and handle any complaints. You may eventually be able to hire employees and take more of a supervisory role, but you’ll still spend about 40 hours a week handling business matters.
This kind of arrangement usually works best for a franchisee who’s seeking personal growth and wants to build operational business skills. Maybe you’ve worked as a middle manager for years and want to see if you can run the show. Or perhaps you’ve spent 15 or 20 years in a non-business leadership role (e.g., as a pastor, teacher, or member of the military) and want to see if you can translate those skills into the business world. Hands-on franchise ownership can give you a chance to expand your professional horizons.
One caveat: If you want to build your business to the point where you can retire from it with a good nest egg, you’ll need some runway. For that reason, I usually recommend operational ownership for people in their 40s or early 50s. At that stage, you still have plenty of working years left and can enjoy the process of growing your business to maturity.
Executive Ownership
Executive franchise ownership comes in a few different forms, but they all involve working on (vs. in) the business. Single-unit executive ownership is possible, but it’s rare. Executive owners typically have multiple franchises. Some are also area developers or master franchisees. This means they have a responsibility to the franchisor to develop a geographic region and/or recruit and manage a certain number of smaller franchisees. As you might expect, this type of arrangement is best for financial growth. Multi-unit ownership of some kind is always the best franchise option for wealth-building.
People typically choose executive ownership because they’re looking for a way to keep their minds engaged without occupying all their time. The setup is especially popular with franchisees in their 50s who are interested in early or semi-retirement but are worried they’ll be bored without some kind of job to do.
Like any franchisee, executive owners have to commit substantial time to the business as it’s launching. But after that, they typically focus on hiring and supervising managers, monitoring the business financials, and planning overall growth and strategy. I generally recommend this type of franchise ownership for former executives or successful serial entrepreneurs. These individuals usually have sufficient financial capital for the necessary up-front investment, and they have the business experience needed to oversee the finances, strategy, and staff of a multi-unit franchise.
The Third Option
I have a confession to make. I’ve described hands-on and executive ownership as a black-and-white choice between two paths. But in reality, franchisees have a third option. Plenty of franchise owners start out as owner-operators and later become executive owners. This can be a good path to take if you have a smaller nest egg and less business experience. You can buy a single unit, cut your teeth on operating it yourself, and then invest your profits back into your business for growth. As you add units, you can hire one or more managers and eventually step back from day-to-day operations. You can either stay engaged as an executive owner, paying yourself a salary from the profits, or you can cash out and retire altogether.
Your personal goals, stage of life, financial resources, and business experience all affect whether hands-on or executive ownership is the best choice for you. That’s a lot of factors to weigh in your decision. It’s a decision I’ve made myself, and I’d be happy to share my experience to assist you. Book a 15-minute chat on my calendar to learn more about how I can help–my services are always free!
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