Employee to business owner: A complete guide

If you’re an employee dreaming of reaching the heady heights of franchise ownership, you’ll be happy to hear that your goal has been realised many times before. It’s not rare for employees to become franchisees, and they often make particularly good managers. Here, we take a look at five reasons why this is the case and offer advice on how to transition from employee to franchisee.

Five qualities employees have that make them ideal applicants for franchisee roles

1. First-hand experience

There is no better way to learn about a business than being on the front lines and experiencing everything first-hand. As an employee, you get to see day-to-day operations from a unique perspective that’s different from that of the management team. You’ll interact with every type of individual, from managers to customers, on a regular basis. You’ll perform tasks that your employer may not know exist, and your on-the-job education will be more thorough than the one most franchisees experience.

This expertise is highly attractive to franchisors, as it means they don’t have to spend as much time and resources on putting you through the standard training scheme. This can, in turn, be great news for you, as you may not have to spend as much in franchise fees.

>> Read more:

• You're Never Too Young to Become a Franchisee
• Become a Franchisee: What All First-Time Franchisees Should Know
• 3 key traits of a successful franchisee
• Five Great Reasons to Become a Franchisee
• Are you ready to become a franchisee? Check out our checklist
• Top 10 things you should know before you become a franchisee

2. An understanding of the business model

As an employee, you’re the first point of contact for customers, suppliers and business partners. You see what sells and what doesn't, when the business gets busy and when it's quiet. You'll develop insight into the business' target market by talking with customers and seeing how they behave and what they buy.

In some cases, franchises lack this client understanding. Some have an over-reliance on the franchise business model, satisfied that it has generated good profits in the past. As a result, they then take a back seat and don’t bother performing adequate customer research.

As a frontline employee, you'll organically develop a complex understanding of who your market is, which puts you in a great position when it comes to owning a business. You’ll have all the essential know-how to direct your products or services at customers in the most effective way. Of course, once you become a franchisee, you may stop being so involved in the customer experience. To maintain your positive performance, you should carry on working close to the ‘front line’.

3. Knowledge of the organisational structure

While you may think it’s easier to get an overview of a franchise’s organisational structure from the lofty position of franchisee, there’s something to be said for the slightly different perspective you get when you rise through the ranks. From the franchisee’s vantage point, you get a complete – if indistinct – picture of the company hierarchy.

From the perspective of the employee, you may not develop a particularly thorough understanding of the upper echelons of the franchise, but your insight into the lower levels is extremely useful. You'll have understanding and experience of how different roles interact, what power dynamics are at play and how to identify the areas where business relationships aren’t quite working.

4. Compassion

In the modern business environment, compassion is one of the most undervalued qualities a manager can possess. There is a type of corporate philosophy that argues: “Business is business; leave the niceties at home, we’re here to make money”. This ‘strongman’ approach to business can have a hugely detrimental effect on team morale, your ability to trust employees and their willingness to go the extra mile for you. While a cold-hearted approach may work for those on Wall Street, it will only damage your business in the vast majority of cases.

As an ex-employee, you’ll have been through the same experiences as your staff and should have a great deal more compassion for them as individuals as a different franchisee would. This should have a positive impact on your managerial skills and ensure you’re ready to build a close-knit team when you find a franchise. In essence, you will probably have a solid understanding of what your employees are going through and take measures to improve the work culture and company morale.

Also, it should be easier to create meaningful relationships with your workforce if they know you were once in their position. The knowledge that they too could potentially rise up through the ranks and become a business owner may even give them a higher level of motivation and encourage them to work harder than they would otherwise.

5. Awareness of inefficiencies

Finally, employees make good franchisees because they have first-hand experience with the inefficiencies found in most business. They know what processes and procedures are efficient and which achieve next to nothing at all. They know where time is lost and where it is gained, which orders and policies passed down from on high are implementable and which ignore the realities of everyday operations.

Essentially, employees are more grounded in the day-to-day running of a business than the owners are. That’s not to say that employees are always right, just that they have a more direct experience of specific, everyday business issues. Once again, you can harness this knowledge when you become a business owner and boost the company’s productivity and – hopefully – profitability.

Five steps for employees trying to become franchisees

1. Learn about every aspect of the business

On your way to becoming a franchisee, you have the opportunity to learn a great deal about the business and experience the many different parts that constitute the whole. Whether it’s training in customer service, supply chain logistics or human resources, this is your chance to get a feel for as many different roles and responsibilities within the franchise as possible. It doesn’t matter what your specialism is, as successful franchise management is about understanding every process and managing the entire business.

2. Start saving

If you’re seriously considering becoming a franchisee, you need to start saving now. Top franchises don't come cheap, and nearly all businesses will require you to invest a little of your hard-earned cash. Many official lenders are familiar with the franchise model and are willing to lend franchisees up to 70 percent of the initial investment capital. However, you’ll need to prove that your business has a good chance of turning a profit. This means creating an impressive business plan and preparing for potential issues.

3. Look for collaborators

Franchises aren't run by a single individual. It takes a group of talented people to keep things operating smoothly. Consequently, you'll need to build a strong team around you if you're to grow and expand your business quickly. One of the essential qualities of any successful business owner is their ability to surround themselves by intelligent people. Don't be complacent and assume you can do it alone.

Even if you intend to run your business yourself without hiring any employees, you’ll need to forge cooperative relationships with your franchisor, fellow franchisees, suppliers and your customers. The ‘insider knowledge’, advice and emotional support they’ll provide will be invaluable to you as you develop your business.

4. Ask for guidance

If you’re working under a good franchisee that you feel you can communicate with, ask them for their advice before you take the leap to business ownership. Some franchisees will have worked their way up from being an employee; others will have taken a different route, but whatever their history, they will be able to give you a little support and help you along as you start your franchising journey.

When setting up your own franchise unit, you’ll also meet with the franchisor, as well as franchise solicitors and finance professionals. Don’t be too proud to ask for help, and try to take their advice on board, as they’ll have seen plenty of franchisees during their time in the industry.

5. Create a timetable

Finally, you may find it helpful to create a timetable for your franchise acquisition based on actionable steps. This means planning your path ahead, establishing objectives to fulfil along the way and thinking about how you're going to achieve them.

This will focus your efforts and give you something to aim for. It should also help to keep you positive, as you’ll find that you are working towards your goal even when you feel you’re not moving forward.

Conclusion

Employees often make fantastic franchisees. A great deal of hard work, dedication and perseverance are necessary to succeed, but becoming a franchisee is certainly achievable if you’re an employee at the moment. However, it’s important to make sure you take advantage of every learning opportunity and utilise the unique insight you have as an ex-employee. The key is to accept all help available to you and learn from your experiences. By taking our advice and working through our five steps, you should be the owner of a thriving franchise unit before you know it. For more information about starting a franchise, read our articles on becoming a franchisee and writing a business plan.