Corporate vs franchise – which offers higher earnings?
Choosing between a corporate job and franchise ownership often boils down to potential earnings, a crucial consideration for many individuals. Although both options can be financially rewarding, determining which one pays more requires a comprehensive evaluation of several factors.
In this post, we will examine the fundamental differences between corporate jobs and franchise ownership, taking into account their respective earning potentials. By the end, you will gain a clearer insight into which path may align better with your aspirations.
Corporate vs Franchise Ownership
Corporate jobs do not require upfront investment while franchise ownership does
The primary distinction between a corporate job and franchise ownership revolves around the financial aspect.
When you work in a corporate job, you don’t have to put in any money to get started. Instead, you receive a salary or wage as payment for your work without having to make any initial financial commitments.
One downside, however, is that you usually have less control over your work environment, schedule, and earning potential.
On the other hand, owning a franchise, a ready-made business model, involves a significant initial investment. The franchise requires an initial investment that covers the cost of acquiring the right to operate under the franchisor’s proven business name and approach.
It also includes expenses such as training, equipment, inventory, and possibly even the cost of finding and securing a suitable location.
A franchise owner pays range from a few thousand dollars for a small, home-based franchise to millions of dollars for a larger, well-established brand. Additionally, franchise business owners often have ongoing financial obligations in the form of royalties or ongoing fees paid to the franchisor.
Franchise ownership is high risk but has higher earning potential
Owning a franchise vs corporate job presents both risks and potential rewards compared to a corporate job. Alongside the initial investment and financial commitments, franchise ownership offers the potential for higher earnings and increased autonomy.
Franchisees have the opportunity to directly benefit from the success of their business. As the owner of a franchise, the individual retains a percentage of the profits generated by the operation.
Unlike a salaried corporate job, where earnings are typically predetermined, franchisees have the potential to increase their income based on the performance and growth of their franchise.
Moreover, franchise ownership often grants a certain level of autonomy and decision-making authority.
While franchisees are required to adhere to the established guidelines and operating procedures set by the franchisor, they are still responsible for staffing, day-to-day operations, and quality control.
This level of control allows franchisees to shape their own business and potentially reap greater rewards based on their entrepreneurial skills and efforts.
It’s important to note that the potential for high earnings with a franchise is not a guarantee, and success often requires a significant amount of hard work, dedication, and business acumen.
In an ideal situation, running an established brand name, in the long run, will give you a higher return compared to a corporate salary and also owning a valuable asset. Let’s compare earnings from 5 years as a corporate executive and a franchise owner.
5 Years Earnings: Corporate vs Franchise
It’s important to note that the potential earnings for a corporate executive and a franchise owner can vary widely depending on a variety of factors, such as the industry, location, size of the company, and individual performance.
Assuming both the corporate executive and the franchise owner are successful in their respective roles. The franchisee may have the potential to earn more over a five-year period due to the ability to scale their business and potentially own multiple locations.
On the other hand, a corporate executive may have more stability and predictability in their earnings over a five-year period, with the potential for promotions and salary increases based on performance. However, this may also come with limited opportunities for growth and ownership in the company. Let’s find out!
Corporate Executive Earnings:
Executive pay, or executive compensation as it is more commonly known, is a desirable remuneration package that aims to attract and reward business executives and those in higher positions within an organization.
These executives are typically rewarded with a variety of compensations including salaries, perks, bonuses, and insurance policies.
The following are hypothetical salaries as a Corporate Executive:
Year 1: $100,000
Year 2: $103,000
Year 3: $105,000
Year 4: $110,000
Year 5: $115,000
Total Salary Earned- $533,000
Franchise Owner Earnings
Franchise owners typically earn income from a variety of sources, including the sale of products or services, royalty fees paid to the franchisor, and potentially, income from owning multiple franchise locations. The franchise owner is responsible for all aspects of the business, including managing staff, marketing, operations, and financial management.
According to a report by Franchise Business Review, the median income for franchise owners in the United States is around $80,000 per year. However, this varies widely depending on the industry, with some franchises earning significantly more than others.
For example, fast food franchises tend to have lower profit margins, while service-based franchises like home cleaning or tutoring services may have higher profit margins.
It is important that any potential franchise owner thoroughly evaluates the company’s setup of any franchising opportunity to truly understand what kind of compensation they can expect from corporate headquarters in exchange for following the company’s guidelines.
The following are hypothetical salaries as a Franchise Owner:
Year 1: $0
Year 2: $50,000
Year 3: $80,000
Year 4: $120,000
Year 5: $150,000
Total Salary Earned: $400,000
Franchise Ownership Empowers!
At first glance, it may appear that a corporate job offers more financial benefits than owning a franchise; however, this couldn’t be further from the truth.
Over 5 years of working in an office setting can earn you approximately $533,000 while establishing and maintaining your own franchise nets you around $400,000 – proving to be much more lucrative!
Owning a franchise vs corporate jobs, franchise ownership offers a unique advantage that corporate workers can’t enjoy: equity!
For instance, if the franchise is worth $300,000 after just five years of operation, then its total return for those 5 years would be an astonishingly high $700K.
This figure is significantly higher than what you’d make as an employee in the same time period – a sum of only $533K.
Bonus read: How Do I Know if Franchising is a Good Fit for Me?
Are Franchises Really Worth the Risk?
Weighing the pros and cons of corporate life versus owning a franchise can seem like an impossible task – it’s a large risk to take on.
On one hand, corporate jobs offer reliable wages and corporate support; while franchises require capital investment, long hours, and consistent hard work with no guarantees of success.
Both have their benefits – corporate stability or potential financial freedom – but are franchises worth all the risks?
The answer may differ depending on the business person, but if managed correctly, with the help of a parent company, succeeding in a franchise can provide intangible rewards that corporate life can never give you.
Tips to make your transition successful.
1. Do your research
Thorough research is especially important when transitioning from a corporate job to franchise ownership. This includes understanding the franchise’s business model, locations, structure, daily operations, and expenses.
Remember, making an informed decision requires time, effort, and careful consideration. By conducting thorough research, weighing the pros and cons, seeking advice, and evaluating your personal goals and financial considerations, you can make a well-informed choice that aligns with your aspirations and circumstances.
2. Create a franchise business plan
Creating a franchise plan is an essential step in setting up your owned and operated business. It helps you outline your goals, strategies, and operational details while providing a roadmap for your franchise venture.
Align your goals with the parent company’s mission and philosophy, research the market for potential customers, and create detailed financial projections.
3. Network with other Franchisees
As a franchisee, networking with other business owners in your community can be incredibly valuable. By connecting with those who have already found success within the franchise business model, you can gain unique insights into their strategies and learn from any mistakes they may have made along the way.
Engaging with other entrepreneurs also provides an opportunity for collaboration and shared learning, as you work together to find new ways to improve upon existing systems and processes.
By building these relationships with other franchisees, you can leverage the collective knowledge of the group to better position yourself for long-term success.
4. Develop financial discipline
Proactively manage cash flow by only spending money on necessary expenses such as payroll, legal fees, inventory purchases, etc., while also creating savings plans for future investments.
5. Hire Expertise When Needed
If you need specialized tasks like accounting and marketing services, consider outsourcing them to save time and energy. It will also ensure that you achieve quality results faster.
However, make sure to evaluate the service providers carefully, their qualifications, and their track record before hiring. Try to look for reputable professionals or agencies with experience in the franchise industry.
In addition, communicate your needs clearly, set expectations, and maintain regular communication to ensure a productive working relationship.
6. Stay Up-to-Date With Technology & Trends
As a business owner or professional, staying informed about the latest trends, software advancements, and market conditions is crucial to your ongoing success.
Failing to keep tabs on new developments could result in missed opportunities or an inability to adjust your approach to meet changing circumstances.
Fortunately, there are many resources available to help you stay up-to-date and informed, from industry publications and conferences to online research and networking events. By making an effort to stay informed and up-to-date, you can ensure that your business remains competitive and well-positioned to succeed in the long term.
7. Foster Relationships With Customers & Vendors Alike
Relationships can be built by a corporate executive, but as a business owner, they become even more important. Make sure to keep in touch with your customers and vendors to build a loyal following of supporters who will help your business grow.
Bonus read: How Do I Know if Franchising is a Good Fit for Me?
Conclusion
In the corporate world, you may be climbing the corporate ladder and taking on increased responsibility, but the potential financial reward is limited. If you want to maximize your earnings and benefit from a more flexible lifestyle, corporate vs franchise – owning a franchise could be the answer.
By investing in a franchise, corporate executives can potentially increase their earnings over 5 years from $100,000 to $150,000 or more.
Corporate executives considering a transition from corporate life to business owners will find that franchising offers both financial rewards and the freedom to make their own decisions. They can use their skills and corporate connections to make the leap from corporate executive to franchise ownership.
Ultimately, with dedication, knowledge, and hard work, corporate executives can create a successful and profitable business while enjoying the corporate lifestyle they desire.
If you are interested in investing in a franchise let us help you to find the best franchise match. Book a time here for an initial conversation.
