Franchising Today - Fall 2016 - 23

PARTNERSHIPS

	 With	 the	 parent	 company	 providing	 more	 than	 three-fourths	 of	 the	
initial	capital,	the	risk	is	significantly	
minimized	 for	 managing	 operators.	
Some	 companies	 are	 so	 focused	 on	
limiting	 the	 risk	 that	 they	 will	 guarantee	 a	 $30,000	 income	 in	 the	 first	
year	or	even	pledge	to	refund	the	total	initial	investment	if	the	managing	
operator	 decides	 to	 forego	 owning	
a	 franchise	 after	 that	 first	 year.	 Although	 this	 arrangement	 does	 include	net	profit-sharing	with	the	parent	company,	a	sizable	annual	income	
is	still	achievable.	

ExpandEd FranchisEE pool
In	addition	to	the	risks,	buying	a	traditional	 franchise	 has	 another	 major	
disadvantage:	a	high	price	tag	for	entry	and	sustainability.
	 With	 upfront	 costs	 that	 can	 total	
more	than	$300,000,	many	prospects	
are	 priced	 out	 of	 the	 market,	 which	
creates	 a	 limited	 pool	 for	 franchise	
consultants	to	help.	
	 Now	more	than	ever,	it	would	seem	
that	a	lower	cost	option	for	business	
ownership	 is	 not	 only	 needed	 but	
also	highly	desired.
	 Consider	 a	 2014	 survey	 from	 the	
University	of	Phoenix,	which	showed	
the	 growing	 power	 of	 the	 start-up	
culture.	 In	 its	 survey,	 63	 percent	 of	
respondents	under	the	age	 of	30	desired	to	own	their	own	businesses.	
	 Under	the	managing	operator	model,	a	lower	price	point	provides	many	
more	individuals	with	the	opportunity	to	be	their	own	boss.
	 Budding	 entrepreneurs	 can	 enter	
into	 a	 managing	 operator	 agreement	
for	 only	 $79,000	 while	 the	 parent	
company	 underwrites	 the	 remaining	
costs,	covering	the	majority	of	the	financial	burden.	Is	this	too	good	to	be	
true?	It's	not.
	 As	a	result,	managing	operators	are	

The managing operator model's lower
price point provides individuals with the
opportunity to be their own boss.

granted	the	rights	to	run	the	franchise	
without	 having	 to	 contribute	 their	
life's	 savings	 or	 take	 on	 loans	 to	 assume	the	responsibility.	

consultant's MarkEt
Even	 though	 the	 managing	 operator	
model	 requires	 just	 a	 small	 investment	from	the	franchisee,	it	does	not	
affect	 a	 franchise	 consultant's	 commission.	 The	 commission	 for	 this	
model	 continues	 to	 reflect	 the	 standard	percentage	of	the	total	cost,	including	the	significant	portion	of	the	
commission	 that	 is	 covered	 by	 the	
franchise	company.
	 As	a	result,	the	consultant	receives	
the	 same	 incentives	 with	 an	 en-

hanced	ability	to	cast	a	wider	net	for	
potential	buyers.	
	 Although	this	model	is	still	in	its	infancy,	it	continues	to	gain	momentum.	
With	 that	 momentum,	 the	 industry	
may	find	that	reducing	the	level	of	risk	
in	starting	a	business	could	make	all	of	
the	difference	in	spurring	the	next	generation	of	successful	franchisees.	
Andrew Mengason is COO of BELFOR
Franchise Group, Ann Arbor, Mich. BFG's
current portfolio of brands includes
DUCTZ, HOODZ and 1-800 Water Damage,
a national leader in restoration that specializes in water
damage, mold remediation, fire and smoke damage,
carpet cleaning and sewage cleanup. 1-800 Water
Damage, BFG's newest brand, is the first in the service
industry to adopt a managing operator franchising
model. Follow 1-800 Water Damage on Facebook,
Twitter and LinkedIn.
FALL 2016

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23


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Table of Contents for the Digital Edition of Franchising Today - Fall 2016

Contents
Franchising Today - Fall 2016 - Cover1
Franchising Today - Fall 2016 - Cover2
Franchising Today - Fall 2016 - 1
Franchising Today - Fall 2016 - Contents
Franchising Today - Fall 2016 - 3
Franchising Today - Fall 2016 - 4
Franchising Today - Fall 2016 - 5
Franchising Today - Fall 2016 - 6
Franchising Today - Fall 2016 - 7
Franchising Today - Fall 2016 - 8
Franchising Today - Fall 2016 - 9
Franchising Today - Fall 2016 - 10
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Franchising Today - Fall 2016 - 14
Franchising Today - Fall 2016 - 15
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Franchising Today - Fall 2016 - 19
Franchising Today - Fall 2016 - 20
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Franchising Today - Fall 2016 - 38
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Franchising Today - Fall 2016 - Cover3
Franchising Today - Fall 2016 - Cover4
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2020_vol5issue1a
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue4
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue4b
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue4a
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue3
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue3b
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue3a
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue2
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue2b
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue2a
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue1
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2019_vol4issue1a
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2018_vol3issue4
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2018_vol3issue3
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2018_vol3issue2
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2018_vol3issue1
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2017winter
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2017fall
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2017summer
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2017spring
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2016winter
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2016fall
http://www.nxtbook.com/nxtbooks/knighthouse/ft_2016summer
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