Can you actually buy a franchise and not run it?

Hey readers,

Let’s look at one of the most hyped (and misunderstood) ideas in franchising: 

Executive ownership — can it work from the start?

It’s got a ton of different names. “Executive” ownership, semi-absentee, absentee, manage-the-manager, investor-operator. 

They’re all describing basically the same thing: someone who wants to own a business, but not run it full-time.

Just to clarify: these thoughts are about jumping straight into executive ownership upon launching a franchise. That’s a whole different animal from starting as an owner-operator then gradually optimizing your way out of a job (which almost everyone should pursue). 

Let’s talk about what it is, when it can work, and when it almost certainly won’t.

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I’ll be real with you: I used to say jumping straight into executive ownership was a bad idea 100% of the time.

I have evolved in that view ever so slightly. Now I say it’s a bad idea 90% of the time.

Too many people get sold the dream: own a business, kick back on the beach, and collect checks. Then they buy a business, and reality hits that everything is harder, more expensive, and slower than they thought it was going to be. 

Unless you’re already in a business full-time, it’s hard to really get your head ready for that.

So what changed my view? Partly, it’s that I’ve since seen people pursue it and be successful. 

And I realized I wasn’t accounting for the two variables that can make this a viable approach:

1. How viable is the business model to start and grow without an operating owner?

2. How well-positioned is the owner to start and grow a business without operating full-time?

So let’s break it down.

What kind of businesses can work with executive owners?

If you’ve followed me for a while, you know that I break down the franchise marketplace across two main axes:

1. Brick and Mortar vs. Non-Brick and Mortar

2. B2C vs. B2B

Let’s look at executive ownership through each of those lenses.

Brick and Mortar

If your business operates out of a physical building or storefront, it’s almost always an easier path to hands-off ownership. 

Because putting all your operations within four walls just simplifies things. 

(I learned this the hard way. I own a window cleaning business, and I have guys all over town doing jobs.

I dream of an alternate universe where clients bring their windows to us: suddenly all the knucklehead employees have a manager breathing down their neck. I don’t need vehicles. Insurance is simpler. Heck, even payment can run through a single till.)

B2C

What I mean is, you sell to human customers (vs B2B selling to businesses). 

Here’s why: 

Selling to businesses (B2B) usually means fewer, high-ticket sales — which means your business is all about relationships. That takes time and trustbuilding, so owner involvement is crucial.

Selling to people (B2C) is more of a numbers game. And if your lead gen and sales is more “managing a dashboard” than “schmoozing with clients”, that’s way easier to hand off.

This one’s a pretty hard and fast rule. I think almost every single B2B business needs a full-time, hands-on owner for at least the first year.

• If you want to go deeper on brick & mortar vs not, and B2B vs B2C — here’s my walkthrough.

What kind of owners couple be right for executive ownership?

So let’s say you’ve found a business you’re comfortable with and want to be an executive owner from day one.

Here are the four circumstances where I’ve seen it work:

• You’re an experienced franchise owner already.

This is part business-owner skills (e.g. knowing who to call when something breaks, knowing how to hire/fire/manage, etc) and part franchise-specific skills — once you know how to learn a franchise system, you can quickly figure out which levers to pull to speed things up quickly.

• You own an adjacent business.

If you own another business (or businesses) that overlap with this one, you’re better able to stay arm’s-length.

Maybe you’re sharing real estate, or personnel, or you’ll be nearby anyway while focusing on your other business.

• You’re extremely well-capitalized.

If you’re in a position to seriously over-fund a business — and I mean, say, 50% more than what the FDD says your startup costs will be — then you’re in a position to hire a high-caliber manager that knows their stuff.

It means your investment will take longer to pay itself off, but the math can work in the right concept.

• You partner with a hungry operator.

This is how I got started in franchising. I was the young, scrappy college kid that wanted to own a business but had an empty bank account. I was working with people that wanted to expand their franchise portfolio into home services, but realized it would be a big operational lift — so they put in most of the capital, and I worked my ass off.

The money person gets to be hands-off. The operator gets sweat equity. And franchise brands like to see the combination of well-capitalized and highly involved — even though that’s two separate people.

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The bottom line

If executive ownership is your goal, build a business that can support it. Not every business can. And even the ones that can — you still need a strategy to get there.

Thanks for reading,
Connor

P.S. Want help finding brands with a real path to executive ownership? That’s what I do. Book a call here.

P.P.S. I made a YouTube version of my FDD walkthrough from last week. Check it out!

Ready for the next step? Here are 3 ways I can help you: