Investment or Owner Operator Franchise – which is best for you?

How do you value a franchise? You must consider more than price. You’ll need to think about costs, and your goals. Here’s our top tips to value a franchise correctly.

5 Critical factors to consider before buying a franchise

One of the decisions you must make as a would-be franchisee is what type of owner you want to be. Are you considering a franchise as an investment strategy, or do you want a hands-on business?

Here, we examine the lifestyle factors you should consider before buying a franchise. Because understanding your goals of business ownership will determine the franchise structure you should invest in.

What’s the difference between an investment franchise and an owner-operator franchise?

For some franchise buyers, the goal of buying a business is to replace their corporate job and income.  They’ll be involved in the day-to-day business as well as providing big-picture strategic thinking. They’ll manage their business at multiple levels. They are happy to ‘get their hands dirty’.

Other franchise owners wish to own a business for the investment returns it can provide, but have no desire to manage the day to day operations and staff. They want to improve their wealth through business ownership, while keeping their corporate job or enjoying more time with their family. While some talk about an investment franchise opportunity, others also describe this as a ‘semi-absentee ownership’ business.

Why is it important to decide which type of franchisee you wish to become?

Franchisors have certain expectations of their franchisees. Many – we’d estimate around a quarter – don’t allow semi-absentee ownership. They prefer the buyer to work full time on the business.

It’s also crucial to understand your own goals for your business venture. You may think that you want to micromanage a business, but is this really you? If you get a year down the line and decide you want to manage your business from the luxury of a yacht as you sail the seven seas, your franchise agreement may prevent you from doing so.

Critical factors to address before you invest

It’s crucial that you identify if you have what it takes to become a franchisee. Our experience helps us to assess your potential as a franchisee, and we’ve amalgamated this into a franchise aptitude test. The test examines your personality, skills, motivation, and mindset. It’s going to help you decide if you should pursue life as a franchisee.

The following five questions will help you identify which type of franchise will suit you best.

1.  How hard do you want to work?

Are you at a point in your life when you want to take things a little easier? Or are you ready to throw yourself all-in to a new opportunity?

If it’s the former, then a franchise that allows you to take a back seat while your team does all the sweat work could be for you. On the other hand, if what you want is to be fully involved in the daily operations of your business, then you could do well with an owner-operator franchise.

2.  What business skills do you have?

You may have some key skills from your career in the corporate world that are ideally suited to running a business. You may be a good man manager, and excellent with setting and sticking to budgets. You might be a motivational leader, and have the attention to detail needed.

Not all franchisees have skills to run a business. But this doesn’t mean they can’t be a business owner. With a good team of people around you, it is possible to live a great lifestyle without the need to be ever-present in your business.

3.  How much are you willing to learn?

The more hands-on you are in a business, the more you’ll need to learn. Great entrepreneurs tend to be good learners, willing to try out new ideas, and careful not to repeat mistakes. If you accept criticism well and can provide valuable feedback to motivate employees, an owner-operator franchise could serve you well.

Perhaps you are not a natural learner, but instead prefer to employ expertise to solve problems. What you are better at is big-picture thinking, brainstorming ideas, and tasking others with executing them. You don’t need to be in your business to work on your business.

4.  Do you enjoy managing people?

As a business owner, you’ll spend a lot of your time managing people. From hiring to firing, yours is the final word. If you enjoy recruiting, training, and managing people, you’ll love the HR involvement you are likely to have as an owner-operator franchisee.

If you have invested in a franchise to boost your lifestyle and wealth as a semi-absentee owner, you won’t need to become involved in HR issues. Your manager will do this for you.

5.  Are you investing to buy a job?

To some this may sound like a strange question. To others it will resonate. You may have come to the end of a corporate career, but you’re not yet ready to retire. How would you fill your days?

Buying a franchise could give you the type of work you desire and are good at, without a boss breathing down your neck. You won’t be at the mercy of an external consultancy that decides your job is redundant.

This doesn’t mean you have carte blanche to do as you please – good franchisees are disciplined and follow the models of the franchisor. But you will get to be your own boss and do the work that motivates you.

Summing up

We’re here to help you achieve your goals – not only for your business but also for your life and desired lifestyle. Your success is our success. We will never recommend that an unsuitable person invests in a franchise, whether it is to enhance their immediate lifestyle or to develop a business by being fully involved in that business.

We’ll help you discover if you have the franchisee personality, and learn which type of franchise is best for you, covering all bases.

Why not book a free consultation with New Ground Consulting? We’ll help you assess your franchisee credibility by covering all the factors, and determine which style of franchise is best for you, as well as what sector you should target.

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