Franchising offers a unique and lucrative opportunity for individuals looking to run their own business with the added support of an established brand. One of the most common questions aspiring franchisees ask is: How much can someone make with a franchise?

The answer to this question is not straightforward, as the potential earnings from a franchise business can vary greatly depending on several factors.

Franchise law dictates how franchisors provide financial information to candidates.

    • Laws & Regulations: We will begin with the fact that franchising is regulated by the Federal Trade Commission and sharing earnings claim information outside of what is published in the Franchise Disclosure Document (FDD) is a very big “no, no”.This restriction intends to protect you, the franchise buyer. Franchisors can choose to provide financial representations about their business in their FDD, which is based on the past financial performance of corporate and/or franchise units. It is important to note that most FDD’s are updated once a year (typically before the end of April of each year) and if a franchisor decides to make a financial representation in their disclosure document it will typically show financial data from the prior year. Even if the information shared looks great, that does not necessarily mean you as a franchisee will achieve those numbers or operate your business with the same results. At the end of the day, you are a business owner running another brand’s playbook that has the potential to fail or to succeed. Buying a franchise does not guarantee that you will run a profitable business, generate the same revenue, or incur the same expenses.

Franchisees are the biggest determining factor in a locations success.

    • The Franchisee: You, the owner/franchisee is one of the most important factors in a location being successful. Keep in mind the purchase of a franchise provides you (The Franchisee) the rights to a business model and its trademarks for a period of time, within a defined territory. In exchange, you provide the Franchisor royalties and other fees for the term of the agreement for ongoing support. In short, you are an independent business owner who is operating under someone else’s brand with some training and support. How you run the business is completely up to you, the owner. If you choose to not follow the franchise system or decide you do not have to put in as much work as your past job, you will be on the fast track to failure.

A Franchises' brand can contribute to the franchisees success, but also the cost to get into business.

    • Industry and Brand Recognition: The industry and brand you choose to franchise with can significantly impact your earning potential. Popular and well-established brands often come with a higher initial investment but also offer greater earning potential due to their established customer base and brand recognition.

Franchise location can contribute to the success of that franchise.

    • Location: The location of your franchise can play a crucial role in determining your income. A franchise in a high-traffic area or in a location with a target market for the product or service being offered is likely to generate higher revenue compared to a less strategic location. Keep in mind, that you can often go with a lower-grade location, but you will end up spending the extra money on advertising to drive traffic to the location.A popular franchise route now is to find a business that can be started from home, such as a home service concept. That requires the business to have a vehicle, but not a brick-and-mortar location. As the business grows, you can move into a location, but it will not need to be a top-of-the-line location.

Managing expenses is a must for a franchise owner to be successful.

    • Operating Costs and Fees: Franchise businesses typically come with initial investment costs, ongoing royalties, and fees that can impact your overall income. It’s essential to carefully review the franchise agreement and understand all financial obligations before committing to a particular brand.

Staying on top of market trends and planning can help a franchisee succeed.

    • Market Trends and Demand: Staying informed about market trends, consumer demand, and competitor activities can help you make informed decisions to maximize your earnings. Adapting to changing market conditions and consumer preferences can contribute to the success and profitability of your franchise. Successful franchise owners also take the franchise system and minimally tweak it to better fit their exact market. The franchise experience should be the same from location to location, but you may need to market differently in your town to take advantage of the trends or demands in your area.

Franchise owners must have some management skills to successfully grow their business.

    • Business Management Skills: Your skills as a business owner and manager also play a significant role in determining your income potential. Strong leadership, effective management, and sound financial decision-making can help drive the success of your franchise business and increase your earnings.

 

So How Do I Get Financial Information To Make A Decision?
Depending on the type of information the franchise publishes in their FDD, you will be able to begin to fill in some of the details you will need to make a decision on the business.

The best way to gather this necessary information is by talking with existing franchise owners. They are allowed to tell you anything you would like to know if they are comfortable sharing.  This process is called “Validation” and it is a step in the mutual evaluation process set by the franchisor. These conversations will allow you insight into the financial portions of the business, but also additional information about the franchisor that you will need to decide if this a good partnership for you to enter into.

In conclusion, while there is no guaranteed income with franchising, many entrepreneurs have found success and financial rewards by investing in franchise opportunities. With dedication, hard work, and the franchise system, the potential for profitability in the world of franchising is vast.

Call us today and we can help you do a deeper dive into a franchise that interests you!