Should You Consider a Franchise as a Part of Your Retirement Plan?
Jon Ostenso was a special guest on our most recent podcast, and he had a wealth of information to discuss on owning a non-food franchise. If you’re considering a franchise in retirement as part of your overall income plan, this is one blog that you’ll want to take your time to read.
Don’t have time to read this blog?
You can also listen to the podcast by searching for it on our site: here.
Who is Jon Ostenso?
Jon is the owner of FranBridge Consulting and is a top 1% franchise broker, author, investor, and speaker. He is a multi-brand franchisee and has worked to help others find the same success he has achieved.
You can view Jon’s website and email below:
Speaking to Jon Ostenso
Jon’s latest book, Non-food Franchising, came to fruition in a way that many of us can relate to in life. Like many of us, he spent years in the corporate world and had a great run. However, he had the itch to build his own empire and started with the opportunity to enter a leadership role and support franchisees with ShelfGenie.
He saw many people entering franchises that weren’t food-related and finding ways to thrive.
Fast-forward and Jon has invested in a lot of franchises and recently became the owner of another franchise. Through the help of good managers, he’s able to run his businesses that do not include fast food.
Note: Jon is not against fast food, but he believes that there are easier industries to enter and make money from than fast food.
Thought Process on Franchising vs Starting a Business
Starting a new business takes time and patience. No one knows your brand or what you offer. When you start a franchise, you’re starting with a reputation and potential client base that can help you thrive.
You can:
- Execute a proven playbook
- Work with a franchisor who will coach you
- Network with other franchisees
- Access suppliers and service providers that are otherwise difficult to gain access to
It’s possible to be part-time, full-time, or even an absentee owner when you own a franchise.
Examples of Non-food Franchising and Who Is Buying Them
Franchising demand is skyrocketing, and Jon has benefitted from it. In the first half of this year, he’s been able to double his business. The overwhelming interest exists because:
- People want to make a change and have a hand in things
- Money has been sitting and people want to make it grow
However, the businesses that are doing well in the franchise space aren’t exotic by any means. Instead, Jon is seeing major interest and success with:
- Gutter businesses
- Oil change companies
- Laundromats
- Health and wellness
- Home services
Franchises that are resilient are a great option. People will continue to invest in their homes, pets, health, and things like oil changes even in a recession.
Things like in-home care, testosterone treatments, and non-trendy businesses are some of the best franchises to enter, according to Jon.
We described our audience to him and how we go about retirement planning.
When we asked him who buys franchises, he stated:
- 33% of clients are existing business owners
- 66% of clients are not business owners
People have so many transferable skill sets that allow them to buy and run a franchise with great success. Around two-thirds of franchisees that Jon works with are hands-off owners and simply collect money, thanks to the strong managers that are in place.
You can still operate the franchise if you like, but you can also be the money behind it and take a more hands-off approach to the whole thing.
100% Hands-off
Most franchises fall into a semi-hands-off approach. You’ll need to hire the right people, but they’ll do the rest for you. There are a few franchises that are 100% hands off and the franchisor will even hire the managers for you.
About four or five companies will run the business for you.
What do you do?
- Jump on call once or twice a month
- Make decisions
If you’re interested in owning a franchise in retirement, there are options available that allow you to invest and have the franchisor do most of the heavy lifting.
Financials Around Franchising
Franchising does cost money, so we asked Jon to explain:
- Funding. You can use a special program called ROBS to roll money from your 401(k) or IRA into the business without a tax penalty. You can also pay yourself straight from the business.
- Expenses. Most franchises fall between $150,000 – $350,000 in costs. Many clients put $50,000 – $75,000 into the business and then take out an SBA loan for the remainder.
- Returns. Of course, the return will vary. The franchisor will provide you with documents on the general returns that you can expect. Jon did six gutter businesses last year, costing $200,000-$220,000. These businesses often hit $1 million in revenue in the first year with margins from 15% to 27%.
Almost 90% to 95% of clients start a fresh franchise, but you can find some gems that are for sale. Buying resale does have some inherent risks to consider, too.
Franchises allow you to build toward an exit. You can sell the franchise in the future with a large payoff. One study found that franchises sold for 1.5 times a traditional business, so you can benefit from the income coming in and then sell the asset for a major payoff at the end.
Jon mentions that there are a lot of passive opportunities and other options that allow you to grow and own many franchises – if that is something that you want to consider.
What Starting a Franchise Looks Like
Jon helps people become franchisees, and he recommends that the first step you take is to visit his website: FranBridge Consulting. He will send our readers and listeners Non-food Franchises for free.
You’ll gain access to:
- Jon and his team
- 600+ franchises he works with
- 100% free assistance
Franchisors pay Jon for helping them land qualified franchisees, so you gain access to his help for free.
With that in mind, he will begin by:
- Getting to know you
- Asking you to fill out a form
He’ll come back with a list of 10 – 12 franchises that he believes are a good fit for you. After you receive the list, you’ll be asked to narrow down the options to 3 or 4, and then Jon will make the introduction for you.
Many of Jon’s clients enter franchise opportunities that they never knew existed. Franchises can be a great option if you want to create an income stream in retirement and enjoy a mostly hands-off approach.
Want to talk to us about creating income streams or learn more about franchising?