Which is the best type of franchise, owner-operator or a management franchise?

There are several different options open to you when you are looking at franchising, with a wide range of types of business and industry sectors

Which is the best type of franchise, owner-operator or a management franchise

Two of the most widely used franchise models are an owner-operator and a management franchise, both have pros and cons, and you may be wondering which is the best one for you to choose.

It is one of those questions which doesn’t necessarily have a right answer – it will depend very much on your own ambition and the type of work that you enjoy.

Owner-operator franchise

This is a franchise where the owner is directly involved in the day-to-day operations of the business. Advantages include the fact that you have direct control over the business operations, with a closer connection to customers. You should be able quickly address issues and make decisions, but on the downside, you could have limited personal time. The business will be wholly reliant on your time and effort for business success.

Management franchise 

In this model, the franchisee oversees the operations of the business but does not necessarily handle day-to-day tasks. Instead, you will hire staff and managers to run the business.

This model gives you the ability to focus on strategic planning and growth as you have a reduced day-to-day involvement in operations. In turn, this can provide an opportunity to own multiple units or territories.

However, it could also mean that with a reliance on staff, you could become disconnected from daily operations. And of course, finding and managing the right staff can be challenging.

Before I cover this in a bit more detail, let’s take a look at the other types of franchisee set-up available:

Single-Unit Franchise 

This is where the franchisee operates one outlet in a specific location. Advantages include the lower initial costs although this is balanced out by the fact that growth potential could be limited. 

Multi-Unit Franchise 

This is where the franchisee operates more than one outlet in different locations. As you would expect, this type of franchise provides a higher potential for profit due to multiple revenue streams. 

Master Franchise 

A master franchisee has the rights to develop a specific territory and sell sub-franchises within that territory. This brings advantages, such as revenue streams from both franchise fees and royalties, however, there is a much higher initial investment compared to single-unit or multi-unit franchises. 

Area Development Franchise

The area developer franchisee has the right to open multiple units within a specific area within a certain period. They have exclusive rights to develop a specific territory with the opportunity for higher profit through multiple units, but costs are higher, with possible penalties if growth is slower than planned.

Investment Franchise 

A franchise where the franchisee invests in the business but does not participate in its day-to-day operations. They may hire a management team to run the business on their behalf. 

So, going back to the original question, which is better, owner-operator or management franchise, that will depend on a number of factors. How do you feel about employing staff and taking on a managerial role? That is a key aspect to consider, as although that gives you much more flexibility and the potential to earn more, the management of staff is crucial so that should be something you are prepared to do.

As an owner operator, you have more control without having to rely on staff so it can seem less daunting. Often, an owner operator franchise will have lower overheads too which can be a benefit. However, a major drawback is the fact that whenever you take some time off, your business stops so your income stops too. 

Only you can decide the best franchise for you, think about what you want to do on a day-to-day basis and what you can see yourself achieving in that type of franchise.

Buying a franchise will give you a blueprint to work under, together with training and ongoing support but you will still be the key factor determining your success. So, consider your options carefully before deciding what franchise is best for you.

Cathryn Hayes
Cathryn Hayes