A few years ago for the longest time I always saw myself being a franchise owner one day. It all started when I found out that a friend from the gym owned a highly profitable Subway restaurant in town. I only heard about the positive side of owning a franchise. Recently, I’ve started to hear about the negative side of buying a franchise. Today I wanted to share both sides.
Is owning a franchise worth the hassle?
Let’s start the discussion today by looking at the cons of buying a franchise:
You can feel good by telling yourself that you’re your own boss. You can feel proud for having direct control of your career. At the end of the day all that you’re doing is buying yourself a job. At least that’s what a friend from school told me the other week as he planned the closure of his franchise restaurant. After running the calculations and looking into other job offers, he found out that he could make more money and have much less stress by working a normal job instead of owning his own franchise.
This all ties into the concept of what your goals are with your career plans. Do you want your franchise to be your primary job or do you want it to be a significant source of passive income?
You essentially have no control over much. Does your brother Steve import cheap cucumbers? That’s irrelevant to Subway because you have to order from their suppliers. You also have to abide by all construction and infrastructure policies. Some franchise businesses require that you remodel your unit ever few years. This can cause you problems with your bank because it’s not easy to acquire more debt when you already have debt outstanding. At the end of the day you really have very little control when you own a franchise.
You need lots of money for any decent franchise business that’s for sale out there. This means that you’re going to have to tie up lots of your money into this source of passive income. Are you ready for this? Are there any other ways out there that you could leverage to generate passive income with such a massive amount?
We got the negatives of owning your franchise out of the way, now we can look at the pros of buying a franchise for passive income:
If you buy the right franchise, find the ideal employees, and your business starts to turn solid revenue, then your franchise can become a steady source of passive income. Many franchise owners only stop by once in a while. They essentially delegate and disappear. If you have the capital to purchase a franchise, along with a strong team in place, your new franchise business could be just what you need to improve your bottom line.
If you buy an established franchise, then you’re buying yourself a piece of a well-established company. There’s only so far Jack’s Coffee Shop can go. Tim Horton’s on the other hand, that can go a long way (in Canada at least). When you buy a franchise you’re paying for an established company. You’re buying a piece of the years of marketing. You’re getting a piece of popular brand. The question is, are the franchise fees justified by the strong brand name?