How to Buy a “Side Hustle” Franchise in 7 Steps

The following is a guest post from Evan Tarver, a small business and investments writer for Fit Small Business, fiction author, and screenwriter with experience in finance and technology. When he isn't busy scheming his next business idea, you'll find Evan holed up in a coffee shop working on the next great American fiction story.

Not everyone is ready to start a full-time business. Some people just want to start something on the side of their current job so they can generate an additional income stream. This is known as a “side hustle.” What many of these people don’t know is that you can actually buy a franchise that works as a great side gig.

However, finding the right side hustle franchise can be tough. You need to find a passive business that can largely run without you, and you’ll need to follow a specific road map when identifying and buying one. Below are the 7 steps you should take when buying a franchise as a side hustle:

1. Find a Passive Franchise Business

Finding a franchise that can be run on the side while you work another full-time job is the first step to buying your side hustle franchise. Online sources like as FranchiseGator, Franchise Direct, Franchise.org, and Franchising.com can help you find a franchise business that can match your specific needs and personal preference.

When searching these online directories, make sure you consider the following when choosing your side hustle franchise:

• Low time requirement - Find a franchise that requires little time and effort, can operate with limited supervision, is not too risky to delegate to your hired people, and can generally be managed part-time. 
• Income potential - When starting a franchise as a side-hustle business, it’s very important to set a realistic income expectation. You typically won’t make millions of dollars running a side hustle, and you need to find a franchise that has income potential equal to what you’d expect to earn working it on the side.
• Personal interest - Finding a franchise that’s interesting will make your side business more appealing and make it easier to remain engaged with its operations even while you’re working your main gig.

Common types of passive income franchises include the following: 

• Vending Franchises - These are the easiest to run as a side hustle because you don’t need to be there to run the business. You’ll only have to hire a few people to do the inventory, delivery, and accounting from time to time. 
• Food Carts - A food cart franchise like as a hot dog or taco stand is one of the easiest to manage on the side as long as you hire the right cooks and cashiers.
• Health & Fitness - A fitness center or gym is another franchise which can serve as a passive source of income. You don’t really need to be there but you have to hire competent personnel to manage and man this business for you.

2. Do Your Due Diligence

Once you identify a franchise that works as a side hustle, the next thing you’ll want to do is conduct the proper due diligence. Ensure that you choose a franchise that you can actually run passively. For instance, you can likely run a vending franchise on the side no problem, but for a larger operation like a fitness center, you’ll need to go into the finer details.

Here are few of the important things that you need to find out when doing your due diligence:

• Business Operations - The business operations of your chosen side hustle franchise need to be flexible. You need to choose a franchise with operations that are easily managed by someone else. 
• Terms and conditions - Do your research and find out every detail about the franchising terms and conditions. You can typically find this information online and can even request it directly. Be wary about the requirements that the terms and conditions demand from the franchisee (such as mandatory training, regular meetings, etc,) since this may affect your current full-time job.
• Cost of the franchise - Since this will only be operated as a side business, it’s essential that you don’t spend more in startup costs and monthly recurring costs than what you expect to make in side income. You also need to consider how long it will take for a return on your investment, taking into account the fact that you can’t manage your franchise full-time. This information is available in the franchise disclosure document.

3. Submit Franchise Application

Franchisors are always interested to know more about you as a prospective franchisee, even if you’re just looking for a side hustle. The initial franchise application process involves a screening procedure where franchisors determine your qualifications and level of interest in the business. In this stage, you should make it clear that you plan to run the franchise as a side-hustle and not as a full-time business.

Franchise application requirements vary from one company to another. Some franchisors require you to submit a basic application and then call to meet with you for a formal presentation and interview. Other franchisors require you to submit a complete application, including business plan and financials.

4. Attend Discovery Day

Franchise discovery day is your opportunity to meet with the franchisor to learn more about the company in an informal setting. Discovery days are often held in the corporate headquarters. During this event, the prospective franchisee learns more about the operation of the business, its products and services, the training and support it provides to the franchisees, and the overall financial investment needed.

This is your opportunity to ensure that the franchise doesn’t demand too much of your time and attention, and that you can run it on the side while keeping your full-time job. You have to make sure that it can operate and generate income even if you cannot always be there physically to manage the business.

5. Pay the Franchise Fee

Franchises typically charge what’s known as a franchise fee for starting a new franchise. You can think of it as a startup cost. For example, McDonald’s charges their franchisees as much as $750,000 or more to start a new franchise. For KFC, the fee can run you $1.5 million plus. However, for a side hustle franchise, the franchise fee will be much less.

In fact, you can probably find a franchise that costs between $0 - $25k to start. Which means that there are a wealth of financing options available to you. For example, a short-term line of credit would cover the necessary startup costs. However, if you have a retirement account, you can use a Rollover for Business Startups (ROBS) and cover the franchise fee with retirement savings, penalty and tax-free. No need to go into debt.

6. Hire Competent Employees

Hiring competent employees is another very important - and perhaps the most challenging - step in this process. Since you won’t always be there to supervise and manage your employees, you need to make sure you hire the right people who have the right skills and who you can trust to run your franchise if/when you’re not there.

Determine the positions that you need to fill and the skills needed for the job. You can learn this during the training. The franchise will tell you the necessary qualifications you need and when to hire. You can then advertise your job vacancies through different online HR platforms like Indeed.com, Dice.com, and Allretailjobs.com. Be sure to meet and interview your potential candidates so you can personally assess their qualifications.

For example, if you choose to start a food cart franchise, you need to ensure that the people you hire can maintain the sanitation of your area even with less supervision.

7. Open for Business

Considering everything is settled, the final step is to get your franchise ready for business. At first, you may need to spend more time and give more attention to your side-hustle franchise while your employees are still getting themselves familiar with the operation. This is also the time where you actually see whether the people you hired are really competent to run the business on their own.

While this business is only part-time, you still have to set a few hours a week to monitor it. The franchise is still yours, after all. This means you must still provide it with the attention and effort that it needs so it will become successful. Send your employees to ongoing training as needed, meet with them regularly, and monitor your cash flow consistently.

Bottom Line

When you want to be your own boss but are not yet ready to leave your full-time job and let go of your fixed monthly income, starting a side-hustle franchise is a good option. All you need to do is find a franchise that can be run on the side and hire the right people who can be trusted to run your business.

Comments

[My Money Wizard]

In all the talk these days about stocks, bonds, real estate, travel hacking, etsy stores, bitcoins, etc... Good old fashion franchises seem to get left out of the discussion.

Thanks for the reminder. I've always been fascinated by the idea of a semi-passive franchise.