Buying a business franchise is one of the most trusted ways for you to
venture into business for yourself. You have the backing of an established
brand and an accompanying network of resources. A successful franchise
model will provide you with well-documented systems, a strong support
team, and a great corporate staff to help your entrepreneurial dreams
become a reality. But to become a profitable franchisee, it is important
to make sure the franchise ownership model you choose is the right fit
with your personal and financial goals. There are essentially three different
types of ownership models to consider when buying a business franchise,
each with a unique set of assets and liabilities. These common models
are: owner/operator, executive/absentee owner, and semi-absentee owner.
Each model varies in key aspects such as time commitment, upfront/operating
costs, level of industry knowledge required, scalability and personal
freedoms afforded. Because of these varying levels of commitment and attributes
needed, it is imperative for you to carefully examine your motives and
goals before buying into any franchise model. Once defined, you can better
decide which model will help you reach those financial and personal investment
goals. Let’s examine each ownership model with those criteria in mind.
Owner/Operator: Being an owner/operator is ideal if you are looking for an immediate
career change. With this type of model, you are responsible for the day-to-day
operations of the business. This is a good choice if you want to maintain
total control over your investment and become immersed in the chosen business.
Owner/Operators make all operating decisions, resulting in a greater time
commitment overall. The drawback of this is there can be long hours and
you are tied to that geographic location. For most this means, giving
up your current day job and the financial security net that provides.
Startup period may result in no personal income being generated. However,
staffing costs would be lower compared to other models because you are
the one overseeing the operation management. Knowledge of that particular
industry’s workings is necessary, as you would be immersed in the
daily management. Because of the extensive time commitment one unit takes, the number of
units you can own is less than other franchise ownership models, limiting
your investment’s growth potential. This is a good fit for you if
you are detail oriented and like to have control over every aspect of
the business and if you are looking for an immediate career change.
Executive/Absentee: This business model is suited for you if you are looking solely for an
investment opportunity. The time commitment is minimal as you hire out
all functions to operate the unit. You would have little to no involvement
in the day-to-day operation. No industry knowledge is needed, as you hire
out management. This leads to higher staffing and operation costs. Because
the business is operated autonomously, you are able to maintain your current
job and commitments. This takes the risk out of a startup period where
there can be no personal income generated. You also are not tied to a
location geographically, giving you more personal freedom. This model
allows for larger scalability because the option for multiple locations
is greater. However, you are placing the success of your investment in
the hands of people who do not have the same level of investment as you
do. You may also have to put up more capital upfront to hire the necessary
people to run the daily operations.
Semi-Absentee:
The Sport Clips franchise falls into this category. This model blends aspects of both owner/operator
and executive/absentee model. This model is ideal if you are looking for
an additional income to diversify your current income and build equity
while keeping your day job. The time commitment is low, requiring only
around 10-15 hours per week, meaning you can keep your day job and the
security that comes with a steady income. You hire managing staff for
the day-to-day operations and you focus on leading the business strategy
and managing the managers. This type of franchise is a good fit for those
who are good people managers. No industry knowledge is necessary because
you hire managers with the necessary knowledge. Owning multiple locations
is a possibility, increasing your investment’s scalability. This
franchise model combines the control of an owner/operator model with the
time commitment of the executive/absentee model.
Each franchise ownership model comes with its own set of inherent attributes
and parameters. When buying a business franchise, examine how those match
up with your own personal and financial goals. Once you have done that
you will be able to determine which business franchise is for you. We
at Sport Clips give careful consideration to how well matched prospective
candidates are to the semi-absentee franchise model our salon franchise
is structured around. Only those who we find to have the best suited objectives
are awarded franchises. The Sport Clips franchise maintains such a solid
continuity rate in part because those brought into our hair cut franchise
system are selected based on their compatibility with our business model.
Have you examined your personal and financial goals that have led you
down the path of considering a business for sale? How did they match up
to each business ownership model? Download your obligation free
Personal and Goals worksheet here to further explore which business model aligns with your objectives.
Let’s continue the conversation here.
