The Only 3 Franchise Models That Actually Work

Understanding these models is critical to aligning a franchise with your lifestyle and financial goals. Let’s figure out which type fits you best—book a call now!

DISCLAIMER: The information on this podcast is for general information purposes only. Franchising involves risk and careful consideration should be given before making any decisions.

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Transcript

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Now with the owner operator model, you are running this business full time. So essentially you don't have a job. Some franchise orders will require you for the first six to 12 months to be an owner operator. So what you're really investing is not just financially, but it's sweat equity, right? It's your time, it's your commitment to the business. So what good is growth if you're not gonna be profiting from it?

0:24

Welcome to the Franchise Freedom Podcast, where you can escape the corporate trap through franchise ownership. Here's your host, Giuseppe gr, the franchise guide.

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Welcome to the Franchise Freedom Podcast. I'm your host, Giuseppe Grammatico, your franchise guide, the show where we help corporate executives experience time and financial freedom via franchising. Thanks for joining us today. We're gonna continue with the series. This is four or five. We're gonna talk about three ownership models. And I've talked about this before, but I've tweaked it. I've been talking some people kind of, what I'm hearing from franchisees, from franchisors, and just from people in the business. I wanted to talk about it because this is also a little bit of a. A mindset shift here. But yeah, I this is something that comes up all the time and there's a lot of different terms and some of them mean the same thing, but wanted to provide clarity to anyone listening in today. So today it's really the three models a franchise ownership. So let's start with the traditional model. I call this the owner operator model. Now with the owner operator model, you are running this business full time. So essentially you don't have a job. Some franchise orders will require you for the first six to 12 months to be an owner operator. So that's something you wanna figure out in the very beginning. Do you offer semi-absentee or part-time ownership or not? That's something we would work on together for anyone in the families that I work with. And that owner operator model, I always say is your full-time in the business. This is how I ran my first business. And I learned everything about the business. I was a sales marketing bookkeeping and a technician did the actual work myself. From anything that needed to get done to dealing with customers, cancellation, bookkeeping, all that kind of stuff. And, the way I look at own the owner operator is that you get a better, you're running it full time, but you're getting a better appreciation of the business because you're wearing all the hats. So that is number one. You really get that, that added benefit of learning the business, wearing all the hats, understanding everyone's roles, not just learning it from learning it from a from the the manual that you're given or through some videos, but actually performing all the functions in the business. I tend to see owner operators scale relatively quickly because this is all they're doing. There's no distraction from a job boss calling you conference call. Last minute training or event you have to attend, you're able to dedicate a hundred percent of your time. You are o obviously wanna grow this thing as fast as possible because you don't have any other income coming in as you did from the job. So you're trying to get this scaled up. So what you're really investing is not just financially, but it's sweat equity, right? It's your time, it's your commitment to the business. You get to decide what role you wanna place. You may love sales. And after running the business, the first six months, you may say I love sales, but I'm gonna hire a full-time sales person. And given the time involved for maybe the meetings and the travel I'm gonna stick to networking at the local chamber of event. And that's the beauty of a business. You pick and decide what roles you wanna play in that business. So you're paying with sweat equity. And another advantage that I noticed too is, you're keeping the expense and the investment lower because you don't have the. General manager salary. It could be 50, 70 500,000 salary, whatever you're paying that person. And these are all numbers, right? You have, if there's benefits, payroll, taxes all that stuff that to be factored in. So you're keeping the investment lower. The item seven, as we talked about on the previous episode your pro forma is gonna be less. Some models don't need any other staff. There are, single employee models that you can run on your own where your technicians are 10 99. So you're really keeping the expense to the minimum, maybe working from home and just having a asension of marketing expense since subcontractors are paid after the job is completed and paid for. That's something to look at. It's not for everyone. Some people do not have the ability to leave their jobs. And that's okay. It is a requirement for some brands, and that's something you wanna figure out in a quick way. When people say how do I know it's a good fit? It's not a good fit if it's, if it require, if the brand requires you to be full-time and you can't be full-time on a rare occasion, I just throw this in there, there are brands that will allow you to bring on that manager. But they will be, an equity owner, 25, 50% owner in the business. Sometimes that is allowed very rare, but you know, it's it's come up before. But that is that is an owner operator. So if you have the ability, this is actually my recommendation for those that wanna scale quicker. Again, it doesn't have to be the case. Not all the brands allow it, but it definitely gives you the better appreciation of learning the business especially if it's an industry you've never been involved in.'cause hey, you don't need experience. You do need the skillset set. The franchisor will take care of you. Then you have, semi-absentee with a, what they call real gm I'm sorry, real operator or a GM in place. Now, this is something where, you are hiring a, you're gonna be paying a lot of money for this person, but someone that has really demonstrated working maybe for other brands or was a manager for multiple departments that was able to scale, cut back expense grow the business. So this is gonna be where, semi you're not involved full-time in the business. Maybe you're keeping the job or maybe you're just involved part-time, but this operator really is gonna be involved in the business. You're gonna be paying them a much higher salary. They're gonna have a lengthy resume. They've really had to kind of, proven to you that they can actually do this. They're essentially functioning as an owner. They've had, they've kind of been in your shoes. They're getting involved in hiring and firing and things like that. That is that's one way you're still gonna be involved at a certain capacity. But that person really is spearheading the the business, running the day to day. And they're getting compensated via higher salary. But this is not a, this is definitely a higher, where, you're getting a lot of references and referrals and they've have a lengthy track record of doing this for other businesses. Throughout various industries. My favorite model and this is something that and there's d different approaches that I ran it with, was kind of a, an investor, I investor operator or hybrid model. And I didn't start off with this model. Initially. I was an owner operator that switched to this after a couple years. These models are for people that are in, essentially the owner's involved as much as possible. And they're putting a general manager in place that will, own a percentage of the business. I did phantom equity. Phantom equity was a percentage of the profits you could do percentage of the overall business. The difference is when you go to sell the business and they own 25%, they would get 25% of the proceeds. So something to consider into what you're most comfortable with. But with this model, the difference here is. You're involved. It could be part-time capacity, you're doing everything you can to get them up and running. And then really just kind of figuring out that my my camera switch here. Kind of figuring out, okay, they're gonna get a percentage of the profits, so why is that crucial? They're gonna do that. Manager's gonna do whatever they can to keep. To grow the business and keep the expenses less. Now that they're getting a percentage, just say that's 25% of every dollar in profit they're gonna make those decisions. Do I really need to add to marketing? Do I really need this additional employee? Is that something we can automate with AI or via email or is that a, can we divvy up the functions among the, amongst the staff we have, I gotta grow this and now I have the added incentive. So they're gonna do whatever it takes to grow the business, which growing a business is easy if you're not making money, right? So they want to grow this business and be profitable and make the money. They're gonna treat this business more like an owner. And this is crucial because at the end of the day I've we had I was listening to an interview where the gentleman had a million dollar business and said they scaled from a million in revenue to 5 million. They said that they were making in that process the same net income on that one that 1 million versus the 5 million. So what good is growth if you're not gonna be profiting from it? And some of those difficult decisions may be to cut the client that is taking up 80% of your time and maybe some low lower margin business. Ways to automate things like ai. I use AI in my business. I don't charge for our services. But on the flip side I wanna be able to get back to people right away. So if five people message me at the same time, the ai can answer basic questions, rescheduling and stuff like that. Point, the, to the right podcast to take a look at. So it doesn't take the place of me, but it takes some of the admin off of me cutting my expense so we can continue to run the podcast and offer the service at no cost directly to you. So those are ways to take advantage. So the three types of ownership we'll review'em again. It's the owner operator full-time model, semi-absentee with a real operator putting that person, high-end, elite employee in place. And then we have the investor operator hybrid model. Which is the model I shifted to later on where you have that that general manager that has a skin in the game, whether it be phantom equity or underlying equity, running a day to day, which I think maybe it's not initially, but it's something you transitioned to like I did. I didn't know where the, what the future brought and how quickly I wanted to scale and I just met the right person at the right time. And that person the mistake I made was we did annual bonus, which is a mistake on my end. We switched it up to quarterly because that person didn't know where we stood till the end of the year, and it's better incentivize quarterly as we did the reconciliations and things like that updated the quarterly p and ls as well as the monthly. It's one mistake I made that I encourage you not to make that same mistake. Thanks again for joining. Would love to figure out which type best fits for bets fits your situation. We could book a call and figure that out on our intro call on that 20 minute call Gigi the franchise guide.com. Talk to you guys soon. See ya.

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Thanks for tuning in if you want to learn how to make the transition from corporate to owning your franchise. Join Giuseppe on the next episode. You can also follow on all social media platforms and achieve financial and time freedom today.