Key takeaways
- The three types of franchise ownership are investor, semi-absentee and owner-operator.
- Investors hire a full-time manager, so manager pay is a cost to plan for.
- Semi-absentee owners keep their job and often give the business about 10 to 20 hours a week.
- Owner-operators run the business themselves and skip manager pay.
- Employees give you more control. Subcontractors give you lower overhead and less managing.
Most franchises can be owned in one of three ways. You can be an investor who hires a manager, a semi-absentee owner who keeps a day job, or a full-time owner-operator. Which one works for you comes down to how involved you want to be, your money situation and how you want your week to look.
Definition: A franchise ownership model is how you plan to run the business: who is the face of it day to day, and how much of your own time it takes.
This is one of the first questions to answer when you look at franchises. Knowing how you want to own the business before you look at brands makes the whole search easier.
What are the types of franchise ownership?
| Investor | Semi-absentee | Owner-operator | |
|---|---|---|---|
| Who runs it day to day | A full-time manager you hire | A manager or key employee | You |
| Your time | Not day to day | Often about 10 to 20 hours a week | Full time |
| Your day job | Not needed for the business | You keep it while the business gets started | You leave it |
| Main cost to plan for | Manager pay, plus a possible management fee | Manager or key employee pay | No manager pay |
| Works best if you | Are comfortable handing over control | Are organized and good at delegating | Want to lead the team yourself |
Every franchise, owner and market is different, and experiences vary.
What is the franchise investor model?
The investor model is for people who want to own a business without running it day to day. These owners usually have a strong financial background. They make decisions based on data, not passion.
What it looks like
- You review financial statements, balance sheets and the Franchise Disclosure Document (FDD).
- You hire a full-time manager to be the face of the business.
- You plan for about $80,000 to $100,000 a year in manager pay.
- Some franchises that attract investors charge an extra 5 to 10% management fee on top of royalties.
Every franchise, owner and market is different, and experiences vary.
The reality check
“If you’re not going to be the face of your business, someone else must be, and that comes at a price.” Lisa Welko, franchise advisor and multi-unit franchise owner
Ask yourself: Am I comfortable handing over control, and paying for it?
What is semi-absentee ownership?
Semi-absentee is a hybrid. It’s often chosen by professionals still in corporate America. You keep your job while the business gets off the ground.
- Your time: often about 10 to 20 hours a week.
- A manager or key employee runs daily operations.
- It takes strong systems and trust in your staff.
The upside: You keep your job while you test owning a business.
The downside: Split attention can slow growth if you’re not involved enough.
For the full picture, read our semi-absentee franchise ownership guide.
What is the owner operator franchise model?
The owner-operator model is for people ready to go all in. It’s the most hands-on of the three.
What it looks like
- You are the face of your business.
- You lead daily operations, the customer experience and your team.
- Start-up and operating costs can be easier to manage, because you’re not paying a manager.
- How it goes depends a lot on your own commitment and time.
Every franchise, owner and market is different, and experiences vary.
This model is for people ready to leave their 9-to-5 and build something they can grow over time.
Think like a leader, not just a worker. Your energy sets the tone for your team and your customers.
Should you hire employees or use subcontractors?
Whichever model you choose, someone has to do the work. Your labor model is whether you hire employees or work with subcontractors. It shapes your costs, how much managing you do and how easily the business can grow. Some franchisors require a specific labor model, so check the franchise agreement first.
Employees
Employees are on your payroll. You train them and oversee their daily work. This usually works best for franchises that need steady customer service, brand consistency and a stable team. Retail and food service often use employees.
| Pros | Cons |
|---|---|
| More control over schedules, processes and service standards | Higher costs: pay, benefits, payroll taxes and workers’ compensation |
| Stronger brand consistency | More managing: recruiting, training and keeping people takes time |
| Employees can grow with the business, which cuts turnover | Employment laws vary by state, and you have to follow them |
Subcontractors
Subcontractors work on their own, under a contract, not as full-time staff. This is common in service franchises like home improvement, B2B services and specialized trades.
| Pros | Cons |
|---|---|
| Lower overhead: no payroll taxes, benefits or insurance obligations | Less control: you set expectations but can’t set their schedules or training |
| You can add help based on demand | They may not fully follow your brand’s standards |
| Less hands-on managing | Treating an employee as a subcontractor can lead to legal and tax problems |
Every franchise, owner and market is different, and experiences vary.
How to choose a labor model
- Your industry: Some industries lean hard toward one model.
- Cost or control: If you want full control of the customer experience, employees are the better choice. If keeping labor costs down comes first, subcontractors may work better.
- Your time to manage: If you can’t recruit, train and manage employees, subcontractors can lighten the load. You’ll still need clear contracts.
- Your growth plans: Employees can give a steadier base to grow on. Subcontractors let you change the size of your workforce as needed.
- A mix: Some franchises use both, to balance cost and control.
- Training and contracts: Either way, clear expectations and training keep quality consistent.
- Get legal advice: The wrong worker classification can lead to fines. Talk to a legal professional.
How do you choose the right ownership model?
Start with four questions:
- How involved do I want to be in the business?
- What is my money situation right now?
- Can I afford to hire a manager, or do I want to lead the team myself?
- Am I looking for a side business or a full-time commitment?
Choosing a model isn’t just about money. Our team walks you through the Six Factors, like your time, money, experience and household, to see how each model would work for you. That happens before you look at a single brand.
FAQs about franchise ownership models
How does franchise ownership work in each model?
In the investor model, you hire a full-time manager to run the business and be its face. In the semi-absentee model, you keep your job and a manager or key employee runs daily operations. In the owner-operator model, you run the business yourself, full time. Every franchise, owner and market is different, and experiences vary.
What is the difference between semi-absentee and owner-operator?
A semi-absentee owner keeps a day job and has a manager or key employee run daily operations. An owner-operator runs the business full time and is its face.
How many hours does a semi-absentee franchise take?
Often about 10 to 20 hours a week. It can go up or down based on how your manager is doing. Every franchise, owner and market is different, and experiences vary.
Do investor franchises need a manager?
Yes. In the investor model you hire a full-time manager to be the face of the business.
Can I keep my job and own a franchise?
Yes, that’s the semi-absentee model. You stay employed while the business gets off the ground.
Which model costs less to run?
The owner-operator model, because you’re not paying a manager. Every franchise, owner and market is different, and experiences vary.
Should my franchise use employees or subcontractors?
It depends on the industry, how much control you want and how much time you have to manage. Some franchisors require one model, so check the franchise agreement.
