Corporate vs franchise – between the two, which pays more?
When it comes to deciding between a corporate job and owning a franchise, one of the most important factors for many people is the potential earnings. While both options can offer financial rewards, the question of which one pays more is a complex one that requires careful consideration of a variety of factors.
In this discussion, we’ll explore the key differences between corporate jobs and franchise ownership by weighing the earning potential of each. By the end, you should have a better understanding of which path might be right for you.
Corporate Jobs vs Franchise Ownership
The key difference between a corporate job and franchise ownership is that a job requires no upfront investment. Conversely, owning a franchise requires an initial investment.
This initial investment for a franchise is necessary to secure the rights to operate under the franchisor’s established brand name and proven business model. 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.
While a corporate job does not require an upfront investment, it also typically comes with less control over one’s work environment, schedule, and earning potential.
In a corporate job, employees are typically paid a salary or hourly wage, with benefits and bonuses based on their position and performance.
On the other hand, a franchise owner’s earnings depend largely on the success of their business. While there is more risk involved in owning a franchise, there is also the potential for higher earnings and greater autonomy.
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 your business, 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.
Earnings: Franchise vs Corporate
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 really 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.
Here are the tips to make your transition successful.
1. Do your research
Understand the franchise business model, franchise locations, corporate structure, day-to-day operations, and costs involved before making a decision.
2. Create a franchise business plan
Establish clear goals for yourself when setting up your owned and operated business as well as an exit strategy in case you need to pivot or shut down operations.
3. Network with other Franchisees
Connect with existing business owned by franchisees in order to gain insights into their successes and failures so that you can learn from their experiences and improve upon them with your own approach.
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
Don’t be afraid to outsource specialized tasks like accounting and marketing services if needed – this will save time and energy while ensuring quality results are achieved quickly and efficiently!
6. Stay Up-to-Date With Technology & Trends
Keep tabs on what’s new in the corporate world such as software advancements and the latest trends; this will help inform you how best to adjust your approach over time based on current market conditions.
7. Foster Relationships With Customers & Vendors Alike
Relationships can be built as 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.