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Franchise Prospector » Money & Financing
How Much Can I Make as a Franchisee?
Money & Financing
When entertaining the option of buying up a franchise and going into business, one major question is on the tip of every entrepreneur's tongue: how much money will I make?
Simply put, the amount of earnings one can expect from a franchise is oftentimes up to the individual investor. This can be found out by determining exactly what level of involvement he or she wishes to have in the business. By simply investing in a hands-off kind of way, letting other people run the business, an entrepreneur will naturally see less of a return than if full time work is put in as well. There are certain ways to go about finding out this type of information. Interviewing current franchisees in one's prospective field, for example is a great way to go.
Interestingly, turning to the company for information on what to expect in terms of profit might be more complicated than expected. Although it seems this question should be readily welcomed by the franchise companies who are eager to make a sale, many have found that is surprisingly difficult to get a straight answer out of these companies.
How come? To get the full story, it is important to look back a little into the national record of franchising in the United States. The concept was new, the industry was booming, and along with this came a lot of fraud. That's because there was still very little regulation, and companies selling their franchises would make all sorts of bogus claims about how much an entrepreneur could earn by becoming a franchisee with them. Obviously, this was meant to increase sales, but unfortunately resulted in a lot of dashed hopes - and fresh lawsuits - when franchisees realized that they could not resolve the gap between their real earnings and what they had been promised. So, in order to put a stop to all of this, the government stepped in nearly three decades ago and delegated responsibility to a special commission to develop rules and regulations that would curb these devious marketing strategies.
Still, however, there is no explicit rule stating that a company cannot disclose information about how much its potential franchisee can earn. There is, however, a definite - and quite strict - set of guidelines that maps out exactly how a company's estimates on a possible franchisee's earnings can be let out to the investor. One aspect of this process that makes it less desirable for the company is the fact that real projections are not always as glamorous as one might like them to be. This is due to the fact that they are held entirely accountable for the projections, and are required to make plain the difference between the real data and what they suppose might be a future franchisee's earnings. It must be included neatly on the required form for everyone to see. While this could be beneficial to any investor who naturally wishes to run up a standard cost-benefit analysis, it isn't the best material for a salesperson. Because of this, the company often won't take the extra time to draw it up, and certainly doesn't bring it out as a first order of business.
This is not to say that franchisees' earnings are bad. On the contrary, many entrepreneurs achieve great success through this type of business endeavor. But it is simply due to the fact that, first of all, companies often find that these figures are not all that necessary for making the sale, and secondly, many businesses are unwilling to shell out the extra resources it takes to prepare this type of information. Indeed, a major reason for many franchisors' reluctance to disclose how much profit a future franchisee might turn is due to the cost involved in getting it all together. Although the process is fairly simple, many companies unfortunately see this as just not worth it to make these figures available.
To get around these obstacles, the best solution for an entrepreneur who wishes to obtain an accurate assessment of what he or she might gain from a certain franchise endeavor is this: independent research. Why not ask other franchisees what they earn? A simple telephone conversation can bring someone a wealth of information about what to expect from becoming a franchisee with the particular company in question. In addition, to personal projections based on how involved one wishes to be in his or her business, this is an excellent way to poll the industry and find out, exactly, where one will fit in.
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