Is a Franchise an Investment or a Job?

January 19, 2015 3:40 am Published by 2 Comments

In response to this article: Is a Subway Franchise a Good Investment?, a reader on Linkedin asked if buying a franchise is “truly an investment” or “is it simply buying a job?”

My initial reaction was to strike back – I get the job question all the time – and I was about to reply: “Tell me a job that allows you, upon your resignation or retirement, to sell the assets that you developed while you worked the job.”

But something told me that the commenter was not being sarcastic. I think the investment question is honest, and I’ve thought about it this last week.

Is a franchise an investment?

Officially an investment is “the action or process of investing money for profit or material result.” My Linkedin commenter would agree: “The term investment suggests your capital contribution is working for you.”

So let’s see. Is building new highways an “investment”? Or is that a way for politicians to make us feel better about our taxes? Is a college education an “investment”? Or is that how educators make us feel guilty if we don’t get one?

Is a franchise a job?

I think most people would say yes, we “invest” in roads and education. But wait. My Linkedin commenter said “If someone buys the franchise, then works 16 hours a day keeping the doors open and paying the bills, is it truly an investment? Or is it simply buying a job?”

In other words, so long as you use your money, and not your time, it’s an investment. But when you contribute sweat equity then it’s . . . a job?

Technically, yes. But does it matter? Would we all feel better if we said that a college education is not an “investment” because it requires sweat equity (i.e. studying, analyzing, writing, etc.)?

Would it make a difference if we said that a franchise is not an “investment” because it requires sweat equity? Even if you like it, it’s still a job, so don’t call it an investment! God forbid, don’t buy one because you’ll have to work in it, and even if you like it and sell it for a fortune — well, it’s just a job!

Can you invest sweat equity?

Or is sweat equity an asset that can be invested? Hmmm. Ultimately, you’ll have to decide.

Meanwhile, I know a guy who owned six muffler shop franchises. He sold them for several million dollars when he was in his 80s. He happily worked in one of the shops every day for about 40 years. His initial “investment” was less than $40,000 to get the first shop. If I told him that all he had all those years was a job, he’d just look at me and . . .  laugh!






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This post was written by Dr. John Hayes


  • EricStites says:

    Great question John. I understand your LinkedIn commenter’s perspective, but, as you point out, he or she is incorrect. A “passive investment” (like buying stocks) requires not sweat equity (other than research and buying the stock) but many investments require active participation by the investor. Granted, some investments require more participation (ie sweat equity) than others, like investing in a franchise businesses, but you’re building equity in an asset that can ultimately be sold (assuming all goes well!). Your muffler shop owner is a perfect example.

    Thanks for sharing!

    Eric Stites
    CEO and Managing Director

  • Brian says:

    Technically, it’s an investment. It’s the ‘serious’ way of starting a business. Although there’s (usually) other bills to pay as well as a result, it’s simply part of business. You’re making money, which makes it an investment. It’s just not the type of investment in which you get a 175% return (or whatever the percentage may be).

    However, it can also be both an investment and a job… if you invest in a business and also work a job within the business. It’s never just a job.

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