CEO of Frannexus, award-winning franchise consultant and author of “Profits are Better Than Wages“.
If there is one thing that Covid-19 has taught us, it is the uncertainty of what life can throw into the mix. Many people have found themselves either underemployed or laid off completely due to the pandemic’s economic hardships. That reality is making many Americans consider finding more security in the job market.
When someone employs you, you have little control over your position, and sometimes even whether it will exist from day to day. As a business owner, you have a little more security knowing that what you own is yours and as such, you can’t just be fired or laid off on a whim.
There are two paths to earning a profit when it comes to working. The first of the two paths, either being an employee or a self-employed business owner, involves substantial labor to build income and wealth. The other path, being a business owner or investor, uses labor and leverage to build wealth.
If you choose the second path, you aren’t just working to pay the bills and get to the next paycheck; you’re ideally earning a profit that can be used to build more wealth. The difference is that you aren’t working to help someone else achieve their goal of accumulating wealth; you are working toward your own goal.
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When you are a business owner or an investor, all of the hours you work serve to further your own asset growth. Once you put in the hard work and labor, the goal is to sit back and let your money work for you instead of the other way around.
Traditional Business Ownership Versus Franchising
Deciding to own a business is an excellent path to investing and accumulating assets, but it can also be filled with trepidation. According to the U.S. Bureau of Labor Statistics, about 20% of business startups don’t make it past the two-year mark, with nearly half not making it past five years. What’s more, 65% fail before their tenth anniversary and only 25% succeed past 15 years.
These statistics sound pretty grim, but there are differences between a traditional business model startup and a franchise business. Unlike a traditional business startup, owning a franchise allows you to skip much of the hard work of building a traditional business and accelerating the profit phase. In fact, as I discussed in my most recent article, there were nearly 800,000 franchises in America producing almost $800 billion a year at the end of 2019, according to Statista.
The marketing, branding and customer loyalty are already done for you. Also, in my experience advising franchise operators, there are minimal learning curves involved. When you buy a franchise, the franchisor provides ongoing support to fast track your knowledge base and expertise in the industry.
How To Build Wealth Through Franchising
The key to building wealth through franchising is researching what will work in a specific area and what won’t. It is also important to understand what your locale is missing or can support. The economy is uncertain, as we have all learned in the pandemic era, so choosing the type of franchise that will weather the storm is critical in order to survive and thrive.
Industry data has told me that franchising industries that fall into home services, children’s educational programs, general health, fitness centers and food tend to stay afloat regardless of economic cycles and downturns.
Other considerations to make are whether you want to run an “owner-operator” or an “executive” ownership model. The difference is mainly that an owner-operator operation gives you more control from the top down, but it also limits where you throw your energy and how quickly you can expand.
An executive ownership might mean that you relinquish control to managerial staff, but that allows you to focus your sites on growth right out of the gate. Executive ownership is designed to help you expand more quickly, but it demands that you have more capital to invest upfront, which might not be possible.
Choosing A Franchise With Scalability
Another important factor to consider is the scalability of a business. Scalability is the limitation that a business has for growth. Look for franchises that have unlimited growth potential. The idea behind a franchise that has unlimited growth potential is that you keep your overhead costs low and you open multiple units, which are meant to grow exponentially, individually.
The key to wealth accumulation is not owning one single franchise; rather, to own multiple units whose profits all flow to you, the owner. In my experience, nearly 50% of franchises are multi-unit operations. However, that requires relinquishing control and focusing on the executive ownership of a business.
Although it might be difficult to wrap your brain around building an empire in today’s economic uncertainty, I believe the time may be ripe for it to be the best timing imaginable. When the economy is in a downturn, things like unemployment make it easier for you to retain talent. More availability of rental space can allow you to get a better rate for real estate.
So, if you change your mindset to see opportunity rather than limitations, you might find that now is the right time to act.
Building Sustainable Wealth Through Franchising
If there is one thing that we can all agree on, it is that life is unpredictable. We can also agree that we have very little control over what it throws our way. We can, however, set ourselves up to accumulate wealth regardless of external conditions. If you are ready to not only have control over your financial situation but also to grow it exponentially, then franchising might be the ticket to get you there.