Is Franchising A Passive Investment? A Guide For Prospective Franchisees

Aspiring entrepreneurs often wonder: Is franchising a passive investment? The short answer is yes. But it takes an emphasis on strategic planning, investment in a strong team and hands-on effort (especially early in the business opportunity). While franchisors offer strong, dependable systems and established recognition of the brand, achieving a truly passive income stream takes patience, time and careful management.

“I think that if you put the time in and you're patient, it can be a passive investment,” said Mosquito Squad and Lawn Squad multi-brand franchisee Dave Laferriere. “I think you can make that work. Depending on how soon that happens, though. It depends on how aggressively you want to take that.”

How Franchising Becomes Passive

Turning a franchise into a passive investment is anything but instant. It involves a structured effort upfront and early in the franchise's operations. So, is franchising a passive investment? Here are five key considerations:

1. Invest In The Right Team – Hiring and training competent managers is critical. A team should be capable of running daily operations independently if necessary.
    
2. Hands-On Early Effort – Initially, personal involvement and operation of the business will be high. But a thorough understanding of operations, combined with an emphasis on the customer experience, is essential before taking the desired step back.
    
3. Leverage Systems and Processes – Implementation of strong workflows and reporting systems will help. Standardizing procedures helps allow a team to operate with efficiency (without constant supervision).
    
4. Financial Preparedness – Franchise owners should be prepared to invest in strong staff as well as operational support. Cutting corners early in any opportunity can limit one’s ability to step back later.
    
5. Patience Pays Off – Passive franchising should be a long-term goal. That success depends on gradually making the transition from active daily management to more passive general oversight.

The Takeaway

Is franchising a passive investment? It can become a passive investment, which requires the right strategy. By investing in talented employees, instituting strong operational systems and dedicating high effort early in the business, franchise owners can reduce their daily involvement. Careful planning and patience are the keys to turning a franchise into a sustainable income stream.

“It’s about putting the correct team in, having the right management,” Laferriere said. “If you want good help, you're going to have to pay for it. But that's going to free you up later.” 

With the correct approach, especially early, a franchise opportunity can offer both financial opportunity as well as the desired level of freedom many entrepreneurs are seeking.

Want to learn more about franchise opportunities on 1851 Franchise? Be sure to visit our Power Rankings to read more on brands making moves.