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Franchise Buying Guide

Should 'Franchisee' Be Your Next Job Title?

Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

In today's tough economic climate a significant number of unemployed executives and managers are investigating franchise opportunities as an alternative to finding another job. Truth be told, most of these former executives would probably rather have their old jobs back, or at least something new that pays the same as their old position and has more or less the same responsibilities. They are turning to franchising because it is becoming more and more apparent that finding a good job might not happen any time soon.

This leads to a great question for these folks to consider: What is the difference between getting a job and owning a franchise? There are definitely advantages and disadvantages to either choice. The right answer varies from person to person, based on what they want to achieve in life and how they feel about factors like risks and rewards. Let's start by taking a good hard look at the status of both the job market and the franchise industry.

The job market today is a mess. Not only is unemployment high, but the few companies that are starting to hire are taking advantage of the marketplace by raising qualification requirements and slashing starting salaries for new positions. They still get willing and qualified applicants lining up at the door, so why wouldn't they do this? Many unemployed executives have realized that the job they used to simply doesn't exist any more at that salary they were paid, and there's no telling when or even if it will return. This dynamic is causing a phenomenon of "under-employment" that may take years to correct itself. It's not a pretty picture for the job seeker.

The franchising industry is also suffering in today's market. Many franchise concepts have found that the recession cuts deeply into their revenue and margins. In many sectors, only the strong will survive the wait for normal economic times, which means that a prospective buyer has to be even more careful than usual in selecting the right opportunity. The disintegration of the credit markets has made franchise startup lending a thing of the past, so the new franchisee will likely have to look to other resources for the capital to start a business. Most unemployed executives don't have large reserves, so they must find a franchise that starts earning a positive income as quickly as possible. All of these factors make finding a great franchise opportunity potentially more challenging than it was in the past.

Even though the current marketplace isn't great in either arena, there are good opportunities for the careful seeker on both fronts. As you evaluate either option, keep in mind these three key areas that differentiate the two:

  • Income: Both a job and a franchise should provide you with an income. With a job, the income is typically clearly defined; you know what your salary is going to be and how often it is going to be paid to you. There may also be non-fixed income (commissions or bonuses, for example) but that is still usually pretty easy to estimate in advance, so a job provides quite a bit of certainty in relation to income. With a franchise, especially in the short run, your income is far less certain. It is quite common in a business startup to work for some period of time without any fixed income. Though the long-term income prospects may be quite a bit higher in a franchise, you need to make sure you have adequate reserves to live on while you are going through the initial building phase.
  • Wealth: Having ownership in a business is the classic path to creating wealth. When you build a franchise business you are building an asset that grows in value and can eventually be sold--hopefully for quite a bit of money. This wealth payoff to the franchise owner is on top of the income received during the operation of the business. Owning a franchise involves taking more risk in the beginning, but the reward is that any wealth created through your efforts will accrue to you rather than to someone else (as it does when you have a job). This factor is very important to most people who choose to go the franchise route.
  • Control: With a job, your control over your work efforts isn't very high. You basically have an employer who tells you what they want you to do and how they want you to do it. If you own a franchise, you are the employer who is telling others what you want done, and you are completely in charge of what you do at work. This fundamental difference is one that is very appealing to some people but uncomfortable or even frightening to others. As you evaluate which option is better for you, this is something you should carefully consider to make sure you go in the direction that best suits your personality.

Is a job or a franchise better? There is no right or wrong answer. It depends on a person's priorities and what they are trying to accomplish in their life. The basic trade-off is pretty simple: A job has more income certainty but owning a franchise has more wealth-creation potential and allows for greater control. Each person needs to determine the balance between these factors that works best for him or her.
 

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.

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