Can Franchising Be a Passive Income Source?

Franchising comes with a lot of reward, but it also comes with a lot of hard work and effort. If you’re looking to create a source of passive income for yourself, you might be able to do this in the franchising world, but it won’t be immediate, and it won’t be possible in every sector.

In this article, you’ll be able to explore the different ways in which franchising can become a passive source of income, rather than an active one that requires your constant attention. All franchises need some care to succeed, but passive income creation options are definitely available in the franchising industry.

What is a passive income source?

A passive income source is money that you’re able to earn without having to do a lot of active work. In simple terms it’s a business that effectively runs itself. One example of passive income would be owning property and renting it out. Landlords earn a monthly income from renters, but don’t need to complete active work to receive it unless a property issue arises.

If you’re willing to invest a little time now, in the present, you can set up a revenue stream and generate income from it with little or no additional effort in the future. Yes, the money will come in even when you’re sleeping or putting in little to no effort to obtain it. That’s how passive income works.
—Forbes 

How to generate a passive income as a franchisee

Although there are passive income generation possibilities on offer to franchisees, nothing is guaranteed, and franchising isn’t a “get rich quick” scheme which will yield immediate results, especially if earning a passive income is your goal. Every franchise requires nurturing and hard work, especially in the early stages, before it can begin to generate a meaningful amount of revenue. 

The speed at which this happens will be dependent on a number of factors, including the sector in which you’re operating, but regardless of sector, it’s likely to take at least a couple of years to achieve profitability. 

Compared to starting a business from the ground up, franchising is a better bet for success, with 93% of franchisees claiming profitability in 2018 [British Franchise Association]. If you’re interested in running a franchise which will eventually become a passive income earner, you should action the following tips:

1. Be organised 

Organisation is the key to success where passive income is concerned. If you’re not going to be involved on a day-to-day, micro level, you’ll need to make sure you can put a smooth system of operations into practice. Do your research, account for everything, and only hire team members with equally high quality organisational skills.

2. Assess your skill set

If you’re looking to profit quickly, use all the skills you’ve already got to help you out. Try and choose a franchising opportunity in a sector that you have previous experience or expert knowledge of, and you’ll be one step ahead of the game. Even when you’ve got your own expertise, be sure not to refuse any training or support from your franchisor. Stay on top of your game by ensuring you’ve got all the information that you could possibly need to succeed.

3. Source a fantastic team 

To turn your role as a franchisee into a source of passive income, this step is absolutely key. You won’t be able to do what you’re looking to do without the support of a fantastic and reliable team. If you can trust your employees, you’ll find it far easier to step away. Obviously, the more people you hire, and the more managerial tasks you delegate, the more you’ll have to pay. Balance the profits and losses of your business with your desire to generate a passive income, and don’t overstretch yourself.

4. Partner with a dependable franchise 

Partnering with a dependable and well-respected franchise is the absolute best move that you can make in terms of pursuing your passive income goals. A reliable business with a proven track record and a loyal customer base will leave a huge portion of the hard work already completed, and though it might cost a lot in the short term to invest with a well-known franchise, it will allow you to step back more easily and speedily in the long term.

Passive income investment opportunities

Some franchises are better geared up to suit the potential of creating a passive income source than others. If you’re franchising with this goal in mind, you’ll want to take on a more managerial role from the get go. Here are a couple of examples of investment opportunities in which you might find room to generate passive income further down the line:

1. Wok & Go

Founded in 2008, Wok&Go is an Asian fusion food franchise. The initial investment amount for new franchisees is £100,000, with an expected revenue after two years of £550,000. Though you’re able to set up and run a franchise yourself, there’s also another option for Wok&Go investors: you can invest in the franchise, but have it established and run on a daily basis by an experienced team led by the franchisor. 

To our knowledge, we are the only franchisor to offer a "managed" option where the franchisor operates the store on behalf of the franchisee, offering a guaranteed return.
—Wok & Go

2. Clarriots Care

Also founded in 2008, Clarriots Care provides care services to individuals across the country. The company was created after the founder identified a lack of available specialist care in the sector. 

An initial investment for new franchisees will cost £32,500, and the franchise requires no industry experience, as it’s a managerial role. If you can source a fantastic team, in time, this is the kind of franchising opportunity which could eventually become a source of passive income.

3. Combine active and passive income streams to secure maximum franchise profitability

To achieve maximum profitability for yourself and your franchise, consider a hybrid model of active and passive income streams. Franchising takes time and effort, and securing a 100% passive income will be difficult. Craft a bespoke solution for your particular situation which includes active income and passive income, and you’ll have the best shot at success.

4. Passive income opportunities are available in every sector

Passive income opportunities are available in almost every sector. You just need to do your research to find them. Browse Point Franchise’s UK franchise directory to start your search, or, if time demands are your main concern, consider a part-time franchising opportunity.