How to Choose the Right Franchise for Your Financial Horizon

For most of my clients, life is in transition . Some are closing in on retirement. Some have topped out in their current careers or companies, or are working in a dying industry , but want to keep growing professionally . Others have been displaced by a younger generation of executives or expect to get a pink slip soon. Still others are ready to work for their own bottom line , instead of a company’s. Franchising makes an ideal next act for all these situations, but success depends on finding the right franchise fit. And the right fit depends on a variety of factors, one of which is financial horizon.

The Right Franchise for a Short Financial Horizon

Some of my clients have a short financial horizon: they need or want to start drawing an income from their franchise quickly. This usually happens because a candidate has been laid off and doesn’t have a large financial buffer to sustain them. However, I’ve also met candidates who want a quick income generator so that they can accelerate their retirement timeline, or candidates who have large nest eggs but just don’t want to start spending them down right away.

If this is your situation, look for a franchise with a shorter time to profitability. The Franchise Disclosure Document (FDD) will be your best resource for identifying this type of franchise. A franchisor’s FDD usually provides an estimate of time to profitability, assuming certain conditions. Just keep in mind that no franchise is profitable right out of the gate–if a franchisor claims their businesses are, they’re probably fudging the numbers. So you’ll still need a way to pay your bills , usually for at least 6-12 months.

Franchise types with faster time to profitability usually include:

• Single-unit franchises
• Home-based franchises
• Regional or local franchise brands
• Franchises in low-regulation industries and those with no specialized certification requirements
• Franchises that provide essential services
• Recurring revenue/repeat customer franchise models

The Right Franchise for a Medium Financial Horizon

Some of the candidates I work with have a medium financial horizon. They intend to live off their franchise income, but they can wait several years to do it. Or they intend to use their franchise income to supplement existing retirement funds. Some people with a medium horizon have substantial savings to support them during their transition period from traditional to self-employment. Others plan to keep their day job and operate their franchise as a side hustle for the first several years.

If this is your situation, any of the franchise types that work for a short horizon will probably also work for you. However, you can also probably afford to consider franchises with larger startup costs, higher risk, and/or a longer time to profitability. Some additional options to consider:

• Multi-unit franchises with no development responsibilities
• Brick-and-mortar , service-based franchises that don’t require a special type of building or a lot of heavy equipment
• Smaller national brands
• Franchises that provide luxury services

The Right Franchise for a Long Financial Horizon

Finally, some of my candidates have a long financial horizon. They don’t need to draw on their franchise income for 7-10 years, or they see franchising primarily as a wealth-building tool . Candidates in this situation usually have ample retirement savings and don’t intend to live off their franchise income. Instead, they view franchising as a way to keep themselves busy in retirement , accomplish a particular lifestyle goal (e.g., the purchase of a second home), or support their financial legacy .

If you have a long financial horizon, you have the greatest flexibility in choosing a franchise. As long as you have the available funds , you can afford to make a heavy up-front investment in return for a larger payoff down the line. Options available to you include:

• Area development
• Large national brands
• Brick-and-mortar franchises, including those that require specialized facilities or equipment (e.g., food service or auto repair )
• Franchises that provide specialized services, including those that require certification or regulatory compliance (e.g., home health care or tutoring )

Transitions can be tough. It’s almost never easy to go from one stage of life to another, even if you actively manage the transition or view it as a positive event. But franchising can be a useful answer to these transitions, regardless of your financial horizon.

As a former corporate executive who transitioned to small-business leadership, then franchise ownership, then consulting , I can relate. I’d love to help you work through the best solution to your own transition–book a call with me today to start the process!

Start your journey to financial security

This content originally appeared on https://empoweredfranchisee.com/ .