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How much can you make as a franchisee?

By Steve Valentine


When investigating a franchise opportunity one of the most difficult pieces of information to get from the franchisor is how much money you might make. This may be frustrating because you are not going to invest in a business until you have a good idea of what you can earn. In most cases the franchisor is not being purposely difficult. The Federal Trade Commission (F.T.C.) and many states have stringent regulations as to how franchisors can provide this information to prospective franchisees. However, there are ways to get this essential information.

Q: Why is the government regulating franchisors?

A: Early in U.S. franchising history there were many instances of abuse, particularly where unjustified or misleading earnings claims were used to sell franchises. In 1979 Congress passed legislation authorizing the F.T.C. to regulate the franchise industry to try to stop any such bad practices. A number of states also passed similar legislation. The current F.T.C. and state rules do not forbid a franchise company from supplying information about the earnings that can be achieved in their business. They do, however, regulate how this information can be given to a prospective franchisee.

A franchise that wants to provide earnings claims must put it in writing in their FDD disclosure document. Also, it is essential for the franchisor to make sure that the data provided is accurate and not misleading and they need to clearly label any assumptions or qualifications on the data provided.

Assuming they meet the legal requirements, a franchisor is free to provide whatever earnings information they want to a perspective franchisee in terms of sales, expenses, cash flow and income.

Q:Why don’t all franchisors provide this information?

A: It sounds relatively simple but there are still many franchisors that don’t provide earnings claims. There are two likely reasons: First, producing an earnings claim does involve effort and expense for the franchisor. Second, the results are usually “homogenized” or based on partial contributions that some but not all franchisees are willing to share in terms of assisting in the recruiting of new franchisees.

Q: Where else can you find this information?

A: If a franchise does not provide an earnings claim in their FDD, the best source of information to find out how much money you might make is the existing franchisees of the system. Call them and ask. Item 20 of the FDD provides a list of current and former franchisees along with their contact information. You will be talking to many franchisees anyway as part of your due diligence so make sure you also cover the subject of the averages and ranges for earnings in the system. By gathering actual performance statistics, you will have a realistic starting point in determining how much you can expect to make in a similar business.

Q:What’s a reasonable level of earnings for a franchise business?

A:Once you have earnings data, your next question will be whether the probable earnings represent a good return on your investment.

Remember that when you invest in a franchise, you are investing both your time/talent and your money. Therefore, you should reasonably expect a greater return than you would for a passive investment of money only.

If a good return for a passive investment is 10% to 15% per year, you will want to see a greater return in a franchise opportunity. After all, the time you put into your new business should yield you a return at least equal to the return on the money you invest, maybe not the first year but certainly down the road.

A second important point to consider is that a higher franchise investment does not necessarily mean a higher rate of return. While this seems contrary to common knowledge, there are plenty of low to mid-range investment franchises that provide great return on investments. Don’t limit yourself only to high-investment franchises when seeking that business with a high ROI.

How much money you will make as a franchisee depends on many factors ─ from the structure of the franchise (e.g. retail versus service), to how long your franchise has been operational, to how well you understand and embrace the system, to your enthusiasm for the business and how it will help you realize your dream. But, with a little research, you can get enough information to decide if this opportunity makes financial sense for you.

Trust Steve Valentine-Your personal expert at FranChoice.

FranChoice is the premier franchise consultant business in the U.S. As your
consultant I have extensive industry experience. FranChoice has helped more people become franchisees than all of the other franchise consultanciesCOMBINED, and for a good reason– we know the industry inside and out.

Franchoice has carefully pre-screened hundreds of franchise companies and represent
only those that meet our strict standards. We look for companies with a strong
track record, solid training and support, happy franchisees and a good
opportunity for financial returns.

Founded in 2000, FranChoice has helped thousands of people find lifestyle
satisfaction through franchise ownership.

I Can Help You!

As your personal franchise consultant, I can help you find the franchise business
that will be a great fit for your unique needs.

First, I’ll help you determine if franchising is right for you and then we’ll create a
list of goals that franchise ownership can help you achieve. We’ll also look at the
strengths you will bring to your role as a franchisee, and your financial
qualifications.

Next, I’ll compare your needs with the businesses in our inventory. If I find some
with the ability to help you meet your financial and lifestyle goals, I’ll provide you
with introductions. Then I will act as your liaison as you research these franchise
companies. I’ll work to get all of your questions answered and help you find
options for financing your business.

The FranChoice consultation process achieves three important goals:
• You will learn more about yourself and your needs for business
ownership,
• You will avoid wasting time researching non-viable businesses,
• You will discover the advantage of looking at the characteristics of a
business, rather than the business itself.
Of course, my ultimate goal is to find you a great fit in a franchise business. If
you decide to become a franchisee, the franchisor will pay FranChoice a fee.
There is never any cost or obligation to you for using my services.
Register for your free consultation and discover the power of having an
industry expert by your side.

Ready for a
career change?
Explore business
ownership through
franchising!
Our services are designed for
people just like you – those
who have dreamed of owning
their own business and could
use a trusted guide to find just
the right one for their needs.

SValentine@FranChoice.com
800-223-8458
Call or visit my
website and learn more
about me.









Compliments of Your Top 10 FranChoice Consultant: Steve Valentine
Telephone:(520) 423-9992  Toll Free: (800) 223-8458  Fax: (509) 931-5151 http://SValentine.FranChoice.com