Real Estate vs. Franchising: Which Builds Cash Flow Faster?

“Should I go into real estate or buy a franchise if I want to build cash flow to quit my job?”

I get this question all the time.

At first glance, real estate and franchising can seem different.

But most people investing in either one are doing it for the same reason:

To replace their job income and live life on their terms.

Now, I love both business models – I run a $45M+ franchise and invest into real estate.

Real estate has some major benefits, like:

• Leverage
• Cash flow
• Appreciation
• Tax advantages

So if you’re only looking to add $1k to $3k per month of passive income then real estate is a great option.

But if your #1 goal is to generate enough cash flow to leave your job in the next few years…

…franchising has some advantages that are hard to ignore.

Let’s compare the two in 4 areas:

1. Time
2. Passivity
3. Scalability
4. Effort required

(Note – in this edition, I ONLY focus on the cash flow potential of these business models. I acknowledge that they have many other pros & cons, but I can’t cover them all in 1 letter.)

1) Time: Real estate builds passive income slowly, franchising replaces job income faster

With real estate investing, you can go years before your cash flow is high enough to replace your job income.

You need a lot of money to buy properties.

So unless you’re already rich, buying enough properties to make $10,000 / month takes time.

Also, real estate cash flow depends on the market, interest rates, and location, which are out of your control.

This means there’s less room for you to impact their success.

You’re limited by your accessible capital.

With franchises, on the other hand, you’re limited by the work you’re willing to put in.

The model gives you more control over your income growth:

You receive a proven business plan, but it’s up to you to put in the work to produce output.

If you’re serious about it, you can generate decent cash flow within a year or two.

Think about it – would you rather be able to quit your job in 1-2 years or 10-15?

I know which one I’d choose.

2) Active vs Passive: Real estate is fairly passive, franchises start active but can become passive

One benefit of real estate is that it’s pretty passive.

You buy the property, rent it, make money. Right? Well, almost.

Even if you hire property managers, real estate investing is never truly passive.

There’s always something that needs your attention.

Now, how passive is running a franchise?

Starting a franchise requires a lot of work.

But eventually you can build a solid team that runs the day-to-day without you. This disconnects your time from income, making it more “passive”.

Then it’s up to you how involved you want to be.

Many franchisees are hands-on in the business every day. Some let it run on autopilot to focus on other hobbies & businesses. A few go all-in to build a multi-million dollar empire.

The beauty is you’ve got options to build the business however you want.

If you need help choosing the right franchise for your specific goal, you can book an advisory call here – it’s free.

3) Scalability: Real estate can grow wealth exponentially, while franchises offer quicker, steady growth

Real estate is one of the most scalable ways to build wealth.

Using leverage from other investors, it compounds, so you grow exponentially.

Well, at least in theory.

Say that you put in the ~8-15 years required to reach $10,000 a month through real estate –

You’re now earning $120,000 a year extra.

That is a lot of money.

But even if you reinvested all that money into new properties, scaling to, say, $50,000 / month would take ages.

Franchise businesses are designed to scale.

All you’re doing is repeating the same playbook over and over again. Each time you do it, you get better at it.

Once you can successfully run two locations, then you can do four. After you get four down then eight is pretty much the same. For my company, the systems & skills required to operate 30 locations can get us to 50-60.

Once we hit 50-60, things will break and we’ll fix them. Those new systems & skills can enable us to grow to 100+. And so on.

2 -> 4 -> 8 -> 16 -> 30 -> 60 -> 100

At that pace, your cash flow surpasses what most real estate investors build in the same timeframe.

Now, none of this is saying that franchising is a silver bullet.

It’s hard work, especially in the beginning as you’re getting the business off the ground.

4) Effort: Real estate needs ongoing effort; franchises need intense effort for 2-3 years.

With real estate, you often have rental income from month 1 which provides stability.

But real estate still requires effort. It involves a lot of:

• Research
• Analysis
• Deal-finding
• Putting out fires

…but spread out over a longer timeline.

Compare that to building a franchise business, where you’re draining money until you make it work.

There’s a lot of risk and stress involved.

That’s the price you pay to be able to achieve such impressive results so fast.

But for those who:

• Have an entrepreneurial mindset
• A willingness to follow a system
• A massive drive to succeed

Franchising can be a great vehicle to build cash flow to fund your dream life.

So, should you go for real estate vs franchising?

Neither option is easy.

But with a franchise, you can condense a decade or more of real estate investing results down to a 2-3 year period…

If you’re willing to do what it takes.

So are you the tortoise or the hare?

Do you want to build cash flow slowly and steadily over time with real estate?

Or are you willing to put in hard work for a few years with a franchise so you can have a chance at true time and money freedom while you’re still young?

The choice is yours.

I run a $45M+ franchise business. On the side, I help people like you find the right franchise opportunity for yourself. If you’d like a free advisory session with my team, book a time that suits you here.

Cheers,

Brian Beers

P.S. One thing real estate and franchising have in common is this: you get out what you put in. If you treat your franchise like a hobby, you’ll get hobby income. If you treat it like a mission, the sky’s the limit. Have a great day.