0.5 The Franchise Landscape
The Franchise Landscape
in 2021, the franchise industry saw a 2.8% increase from 2020, with 774,965 new establishments nationwide, representing some of fastest growth in history. This is due to a strong economic rebound after the pandemic-induced recession, which has caused many people to regain confidence in this model, as well as consumers, feeling more secure about their money spent on anything under control or riskier investments such as stocks. With so many different franchise opportunities available, there has never been a better time to get involved in this exciting industry. Below is an overview of the types of franchise ownership, as well as an overview of the various types of franchises that exist.
Type of Ownership
Different franchises demand different forms of ownership. There are generally three forms of ownership in franchising, and you should know which one is most attractive to you as an entrepreneur, and then seek out franchises that support that form.
Type 1: Owner Operator
The Owner-Operator model is a very common form of franchise ownership. This means that you are the owner of the business, and also heavily involved in the day-to-day work of the franchise. Many home services and B2B franchises require owner-operators, as the franchisee is the one driving sales and networking opportunities at a local level.
While some view owner-operator franchises as just “buying a job”, others find it attractive as it can be an escape from the rat race of corporate America, and gives you the freedom of being your own boss.
Type 2: Multi-Unit Operator
Multi-Unit owners are a different form of ownership that not every franchise allows for.
Multi-unit operators buy and oversee multiple locations of certain franchises, and will often own multiple brands as they build their franchise empire (check out Guillermo Perales at Sun Holdings for just how big a multi-unit operator can get!).
This form of ownership requires a lot of capital to fund consistent expansion, and a sophisticated franchisee to manage different locations, numerous employees, maintain a positive company culture and keep the financial statements organized as the business grows.
Certain brands don’t allow franchisees to own more than 1-2 units, as they want to ensure that every single location has the dedicated focus of a sole franchisee.
Type 3: Semi-Passive Owner
Semi-Passive ownership is the last form of franchise ownership you often see. These are businesses that require some leg work to launch and get off the ground, but once they are opened, and you have a team in place, you don’t need to work full-time on it.
In fact, many people can keep a full-time job while getting a location or two launched on the side, and the franchise serves as an alternate income stream for them.
Now keep in mind that any franchise that advertises as truly passive, and not semi-passive, should sound off some alarms in your head. A truly passive investment would be purchasing shares of a company via the stock market – where you quite literally don’t have to do anything and can watch the value of your shares rise.
Any franchise will require some work even after you have a team in place, as there will be natural employee turnover from time to time, and you as a business owner will want to keep an eye on the key KPIs driving your business.
Nonetheless, if you execute and build a strong team, it’s not unrealistic to think that you can manage a location or two of certain franchises and dedicate just 10-15 hours per week.
There are over 4,000 franchises in the United States. That’s A LOT of options to choose from.