A couple that works full-time earns an extra five-figures each month from the 2 franchises they own. They explain 4 keys to creating passive income through franchise investing.
- Between their two franchises, the Halls have done more than $1 million in revenue.
- To creative passive income via franchise investing, you’ll want to go the executive ownership route.
- Then, you need to hire the right people and do everything you can to retain them.
Erika and Kareem Hall began brainstorming passive income ideas in 2017.
The Atlanta-based couple with two children considered real-estate investing, a popular way to build wealth. However, after conducting their own research, they determined that investing in a franchise would provide them with higher returns while requiring them to work less.
They purchased their first franchise, Soccer Shots, a youth soccer program, in September 2018 and began profiting in their second year as owners. They plan to open a second Soccer Shots location in 2021.
According to profit-loss statements obtained by Insider, the Halls have generated more than $1 million in revenue between their two franchises since their launch in January 2019. They’ve made six figures in revenue in a single month and consistently make five figures in profit.
Erika is an associate professor at Emory University’s business school, and Kareem runs his own consulting firm. They both work full-time and spend one to two hours per week on Soccer Shots.
“I absolutely believe it can be a lucrative passive income stream,” Erika said of franchise investing. “The advantage is that there is a blueprint.” This has already been done. There are all of the resources and templates available. In contrast, if you’re starting a business, you must create everything from scratch.”
The Halls shared their best tips for generating passive income from franchise investing.
1. Talk to current or former franchise owners
Before you even consider purchasing a franchise, reach out to people who have done what you want to do.
“Ask as many different current or former franchise owners as you can about their experiences — what worked, what didn’t work, and the entire start-up process,” Kareem suggests.
Erika had two friends with experience, one of whom had recently purchased a franchise with Primrose Schools and the other who had started her own company and became a franchisor, so franchise investing was even on their radar as a potential passive income stream.
The Halls used them as resources in the early stages and relied on their expertise when deciding which franchise to purchase.
“I went to lunch with them and brought the FDD — the franchise disclosure document, which is a long document that a franchisor has to file that gives you the margins, typical start-up cost, and all of the legal details — and we all talked about it,” Erika explained. “They also vetted it for me.” It was nice to have that group of women who worked but also had franchises on the side. “If they can do it and be a support system and walk me through it, then this is the way to go,” I reasoned.
2. Select a franchise that allows you to be an executive owner
If you want to earn passive income, consider executive ownership, which is when you own the company but hire someone else to manage it.
An owner-operated model, on the other hand, does exactly what its name implies, putting you at the center of the business’s operations. “That would have been us actually managing the company and taking a salary from it,” Erika explained. We currently pay someone a salary to run it for us and then keep whatever profits we make. If we ran it ourselves, we would have to quit our jobs or take it on as a second job with a salary.”
Some franchises require you to use the owner-operator model, so look for ones that also allow for executive ownership, according to Erika.
They advised looking through lists of top franchises from websites such as Franchise Business Review and Entrepreneur when looking for potential franchises to buy. These lists include useful information such as the total start-up investment, the required net worth, and the royalty fee.
3. Hire the right people
Hiring an executive director to manage day-to-day operations is an example of executive ownership.
“Who you invest in — your personnel — is one of the most important factors,” Erika explained. “Take your time with it, try to find people you trust, and thoroughly vet them.” By conducting real, dynamic interviews, you can evaluate them not only on their qualifications, but also on their personality traits.”
They hired Jon Brock, their director for the past five years, after several rounds of interviews. He also co-owns and manages their second franchise, which they purchased in 2021.
“Once you have someone who is great, which is difficult to find because the labor market is so competitive,” Erika added, “invest in them because you want to keep them.” “Make time for them if they have something they want to talk to you about.” If they want health insurance, see if that’s an option. If they want more equity or to grow, don’t ignore them because people are always looking for new opportunities, so you want to make sure they’re satisfied.”
The Halls employ 11 people, four of whom are full-time, and are working to provide retirement plans for everyone.
If you put in the time and effort to find the right people for the job and then keep them, you will reap the benefits later on. “If you truly want it to be passive,” Erika added, “then hire the right people, give them the instruction manual, and off they go.”
4. Get more out of it than whatever the work is
While the Halls have made Soccer Shots as passive as possible, owning two franchises while working full-time and raising two children can be overwhelming at times.
But, in the end, “Soccer Shots brings me more joy than the work that we allow for it,” Erika said. She and Kareem both believe that they get more out of it than they put in.
“In comparison to something like real estate, where I own a house that is accruing money in some random place, my kids are within the age set of Soccer Shots and thus they also experience it,” she explained. “They’ve done Soccer Shots their entire lives.” They go every Saturday with their friends, and they have really grown through the program because character development is important.”
It also helps that the Halls are not reliant on Soccer Shots revenue to make ends meet.
Their full-time salaries cover their household expenses, while their franchise profit is extra money they can use to invest for their futures or to enjoy experiences they might not have had otherwise.
“We knew from the beginning that the goal was to create passive income,” Kareem explained. “So this wasn’t us both quitting our jobs to put all our eggs in one basket.” That approach, I’m sure, would have added a lot more stress.”
