Franchise ownership isn’t always a singular goal for entrepreneurs or transitional executives looking to establish the second act of their career. While those are two of the most common franchise candidate profiles, there are others – including savvy investors who routinely explore franchising as a means to diversify their business ownership portfolio. When it comes to a comprehensive wealth building strategy, adding a franchise or two to your enterprise could be an advantageous strategy that allows an investor to balance out their other diversified assets.
It’s a smart money move that can not only expand your business ownership holdings, but also act as a hedge against any underperforming assets – a figurative safety net. Let’s review some of the advantages that franchise ownership can provide as a business ownership diversification tool.
You Can Reinvest Your Capital
In certain situations, adding a franchise purchase to your ownership portfolio can be accomplished with relatively little, or no, debt. You just need to consider leveraging your existing capital by liquidating other at-risk assets to finance the purchase. Not only does this add another revenue stream in your portfolio, but it can also provide a safety net, guarding your overall wealth against the depletion of liquid assets. And remember – once you own a franchise, it’s an asset that can valuate over time – and even be sold at a profit down the road.
You May Be Able to Self-Finance
Though a substantial amount of investors are still unaware of this strategy, it is possible to self-finance the purchase of a franchise using your retirement funds. The most popular among these strategies is the ROBS (Rollover for Business Startups) program, which would allow you to fund your purchase both tax deferred and penalty free – provided you stick to the guidelines. While this can also lower your overall tax burden, it’s recommended you speak with your financial planner or tax strategists to weigh the risks.
You Can Earn True Passive Income
With over 4,000 different franchise concepts in the marketplace, many come with the option of semi-absentee ownership – which is exactly what it sounds like. This approach would allow you a hands-off ownership opportunity, but the wealth you generate would still be hands-on. The strategy involves hiring an experienced employee, preferably with direct in-category experience, then sitting back and managing the manager.
Now might be as good a time as any to pursue franchise ownership to expand your business portfolio to gain another revenue stream. If you’re unfamiliar with how they work, franchises are all based on the owner (or manager) following a proven business model, while working hand-in-hand with backing from the brand itself. And it can be a sound and advisable strategy to diversify your asset holdings. The typical investment range for buying into a franchise opportunity runs from $150K – $500K, usually with only 20-30% cash out-of-pocket.
Exploring franchise ownership opportunities may give you another portfolio asset with steady revenue control, flexibility, and even portability. And with the sheer amount of choices in the franchise marketplace, it’s highly likely you’ll find a business model that aligns with your interests and business ownership profile.
If you’d like to review your options and consider adding franchise ownership to your portfolio of assets, we’d love to introduce you to this strategy. Meetings with FranNet of California are always no-cost and no-obligation to you. Our role and function is to be your guide, allowing you to make your own informed decisions on the direction you want to go. Over time, we’ve had the opportunity to work with hundreds of entrepreneurs who ended up owning the business of their dreams – and we can do the same for you. Getting started with FranNet of California is easy, and you can book an introductory session with us by following this link.