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Is Franchising passive income?

Posted by Carolyn Dufton on 8 September 2008
Is Franchising passive income?

Any person thinking that they can get into Franchising as a way of exiting business and having complete passive income should think again.

This rule applies to both potential Franchisors and Franchisees alike.

Some potential franchisees imagine that because they are buying into an established, systemised business, that their business will thrive with little effort from them personally. Conversely, they believe that as they will have huge support from The Franchisor it will result in less personal effort. It doesn't quite work this way.

Every business needs input and effort.

A good business system certainly may allow the franchisee to spend more time working on the business rather than in the business. However a franchise that is able to be run by managers alone from day one of a start up business with minimal franchisee input is rare.

Franchisees should recognise that being a Franchisee does not allow them an abdication of duty as a business owner.
As a new Franchisor it will take;

  • an efficient system,
  • excellent recruiting of good franchisees
  • sustained effort to establish healthy working relationships with franchisees the provision of ongoing communication and support,
  • for the franchising system to grow and flourish.

Future planning can of course incorporate the recruitment of franchisee relationship managers, which will certainly reduce the day to day workload of The Franchisor.

Appointing Master franchisees into the business is another method of allowing a Franchisor to take a step back from the day to day running of the business.

Effective time management and delegation will also assist in reducing Franchisor involvement. All of these delegation initiatives can and should be introduced, but realistically, only when the network can financially justify the extra costs involved.
The lesson here is to fully research franchising as a business model before jumping in blindly.

Are you suited to being a franchisee or a franchisee? Speak to someone who knows the industry inside out who can explain the reality of franchising and not a pipedream.

If education is too late and you're already involved in Franchising and wishing that you weren't. get out quickly and sell.. whilst you still have a business.

Summary

  • Research franchising generally and find frank and objective advice.
  • Conduct due diligence on the business either to be franchised or to buy as a  franchise.
  • A franchisee is responsible for their own success. Don't blame failure on the Franchisor.
  • Take your time don't be hasty to make decisions without considering the facts.
  • Good communication and relationships are the key to a healthy network. A Franchisor  and a franchisee should never lose sight of this.
  • If it's all too much sell the franchise to someone who cares.

http://www.franchisingplus.com.au/

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Author: Carolyn Dufton
About: Carolyn Dufton Dip. Bus (Franchising) heads the team as the owner and manager of franchisingplus. Carolyn has a wealth of small business experience, and many years of hands on franchising experience.
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Tags: Franchising

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