Franchise Management Types
Hi! In today's video, I'm going to talk about franchise management types. I will explain three roles the franchisee may have towards the business and also the investment level of each one of them in general.
The first type is the Owner-Operator. Normally, the franchisee is very involved in the operation, does not have a team to manage, and execute the day-to-day activities of the company. Some franchises are designed to work like that, with no employees or very few even when the business is mature. Other franchises are not intended to depend on the franchisee to execute operational activities, sometimes only in the beginning. As the company grows, the franchisee role's shift to the executive level. For Owner-operator franchise concepts, usually, the total investment is less than 100k.
Executive level is the second type we will talk about, and it is when the franchisee has a team to manage, and he's like the CEO of the company supervising all the aspects of his business. Usually, he's no longer involved in the daily activities of the business, and his focus is on strategy and relationship-building. For executive-level franchise options, often the total investment is more than $100,000 and can be up to 200 or even more depending on the concept. Usually, for service-based franchises, the investment is between 100 and 150000, where a considerable amount of this investment may be reserved as working capital for employees payroll.
The next stage in the executive level is when the business grows, and the franchisee opens more units or expands his territory. He hires managers or supervisors to work in those units, and he manages them all, focusing even more on the strategy and management skills.
The third type is the semi-absentee, and it's a format where the franchisee usually works on the business 10 to 20 hours per week depending on the operation. In most cases, a general manager runs the daily activities, and the franchisee supervises this manager using systems provided by the franchisor. Semi-absentee franchises are usually brick-and-mortar, like gyms, restaurants, fashion stores; and some are designed to have a general manager since the beginning, not depending on the franchisor to execute operational activities or manage the whole team full-time.
The total investment is more than $150,000, and that's understandable in these kinds of businesses since you have to purchase expensive equipment, there's some construction to be done, etc. On the lower end of investment options for semi-absentee ownership, we find hair salons, where they usually require less expensive equipment than those other concepts. It's important to keep in mind that in order to have a semi-absentee model with a manager running the daily operations and also a good return on the investment, the business needs to be healthy enough to pay for the manager salary and also generate profit for the franchisee.
One exception is vending machines, where the initial investment doesn't need to be so high. Once the business owner has installed all the equipment, he can operate by himself dedicating only a few hours per week, buying the products and refilling the machines as needed. It's important to point out that usually, these kind of concepts are not eligible for the E2 Visa because in most cases there's no real perspective to generate jobs.
So to sum up, we could say that lower investment franchises usually require the franchisee to dedicate more time in the daily activities of the business and as the business grows, so does his team, enabling him to shift to a more strategic role. Once the company is mature and a good team is in place, he can dedicate less time to the business operation.
Franchises designed to work with less involvement of the franchisee since the begging usually require higher investments, mainly because they are robust operations and with a larger payroll.
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