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Franchise Ownership Can Give You Equity

Franchise Ownership Can Give You Equity

By FranchiseKing, Guest Blogger
Published: September 15, 2015 Updated: September 15, 2015

If you're on the hunt for a franchise, one of the things to consider is equity. It’s something that is not usually top of mind with most franchise buyers. That’s because they’re considering several other things as they investigate opportunities that appeal to them. Like:

  • The brand
  • The business system
  • The total upfront investment
  • The role of the owner
  • Territory availability
  • Growth prospects
  • Profitability

All of those things are important in the scheme of things and you should investigate all of them thoroughly, however, it is important to think long-term as well.

Having Something Of Value

Wouldn’t it be nice (after investing all that money in a franchise) to have something to show for it, 10 or 15 years down the road?

Think about all the work you put into your business. All the sweat. All the headaches. Think about what you were able to accomplish, too. Like being your own boss. And, finally being able to take control of your future. You deserve the rewards.  

One of the rewards you should be able to get is one that’s invisible at first but slowly starts appearing over time, is equity.

How To Increase The Equity In Your Business

There are a few things you can do to increase your equity, and along with it, the value of your franchise business.

1. Keep up appearances

In other words, maintain the appearance of your business. If you own a retail business or a food-service business, it’s going to experience a lot of wear and tear. You should consider hiring a commercial cleaning service to keep your store looking pristine.

2. Expand

If at all possible, expand your business. Expansion plans can include adding more space, adding another location, or adding additional employees. A business that’s expanded is a business that is probably bringing in more revenue. That’s what you want to have.

3. Training

Consider signing up for additional training. If sales are part of your role as a franchisee, find a local sales training class to help you get better at it. Increase your sales to increase your equity. Are your back-office skills up to snuff? There are all kinds of business classes you can take that can help you get better at bookkeeping and accounting which will help you run a tighter business.

Starting At Zero

In order to have equity in your franchise business, you (unfortunately) have to start at zero. Zero in your business banking account. Zero in your cash register. The first sandwich you sell, cell phone you repair, or dog that you groom, whatever it is that your franchise business does that brings in revenue, starts the equity ball rolling.

You’ll need to have patience. You’ll need to show up every day and grind it out just like every other franchise owner does. Shortcuts don’t exist when it comes to building equity in a franchise business. It usually takes years to build equity in a business. It doesn’t matter if it’s a franchise business or a non-franchise business. Will you be patient?

What Will You Do When You Have Equity?

Let’s fast-forward 10 years from the day you opened your doors.

You have a pretty successful franchise business. You’ve managed to open up a second location. You’ve been able to employ a good number of people. You’ve made pretty decent money and have even put some away for retirement. Life is good. And, you now have equity. You own something of value. What will you do with it?

Your choices: 

1. Keep the business going and continue building equity

You may be able to sign another 5-year or 10-year franchise agreement. If you can, focus on growth. Do whatever it takes to increase the value of your business. Also think about involving family members or friends in the business. Maybe you can arrange to sell them the business sometime in the future.

2. Sell your franchise business

You could just sell your franchise business when your franchise agreement ends. That means walking away from the business you built and moving on to the next phase of your life. To sell your business, you need to find a local business broker who’s familiar with franchising. A broker can help you set the selling price of your franchise and bring in potential buyers. There’s no charge upfront for a broker’s services as they are paid a percentage of your selling price.

Owning a franchise can be a great thing. Just make sure you can afford to start at zero, and that you can be patient until things start heading the right direction. You do that by having enough of a cushion to get you through the startup period.

Once revenue starts coming in, make sure you pay your business loan back on schedule, and watch your expenses. Try to expand and/or put money away. So you can have equity.    

About the Author:

Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.