When thinking about franchising your business you probably have lots of questions. One question we sometimes get when talking with people about franchising is, “How much money I can make franchising?” Let’s tackle this now.
Is it Possible to Figure Out How Much Money I Can Actually Make Franchising My Business?
The bottom line is that it is not possible to accurately answer this question. There are so many variables with regards to franchising and so many different moving parts that there is simply no way to predict how much money you could make by franchising your business. It is not possible to know what your revenues will be or even how much you will receive in royalties from franchisees in your first year or subsequent years. All of which equates to your profits.
For starters, we do not know how aggressive you are going to be to get out there to start offering franchises. More importantly how convincing and compelling will you be to someone who is thinking about buying into your franchise program (do you really need help marketing and selling franchises). You have to take into consideration that just because you are offering franchises it does not necessarily mean that tons of people are going to be tearing your door down to buy one. And if you cannot convert people who are serious about starting a franchise business, into your franchisee then you are not going to get much traction.
You also have to take into account how long it is going to take to get your franchisees open for business once they commit to your program (read why it is important for franchisees to be operational quickly). This includes your onboarding process, helping with buildouts, your training program, etc. All of these different variables effect franchisee’s performance and sales. How well you execute your franchise program could be a good indicator to predict your franchisee’s future performance. Because in most cases, a franchisee’s performance is what will dictate your royalties (check out our article that discusses how royalty fees can be structured). Since there is no way of immediately knowing how quick your franchisees will get open and once operational how well your franchisees will perform in different markets; it would be reckless to say how much money you can make off franchisees when franchising your business.
As we build your franchise program, one of many things we will do for you is identify what is an attractive royalty for your franchise system that will enable both you and your franchisee to make money. We will also identify different streams of revenue that you can generate through your franchise program (beyond royalties and simply selling things to your franchisees). But again it is really hard to predict how that is going to play out (learn about the different ways you can make money when franchising your business).
You may be thinking, “How is this any different than when I created a budget to open up my own business?” The answer is easy. You know how committed you are to make it work. The unknown in the franchising equation is franchisees, their personalities, demographic area, level of commitment, etc. You know how you operate your business based on your own performance. You do not know how other people operate or what their performance will be like when the chips are down. It’s an unknown variable that will affect how much money you can make when franchising your business.
Do It Yourself Franchise Calculators
Pretend for a moment that you were in a car accident. You are working with an attorney who asks you to pick a magic dollar amount to reimburse you for the time, expenses, pain and suffering and other damages you experienced as a result of the car accident. You pick your number and are excited to collect on it. However, when the case settles and all is said and done, you are disappointed to learn you will only end up getting a fraction of that magic number. This is because attorney costs were not taken into account when you picked your magic number. It is no different with do it yourself franchise calculators.
As you are researching companies that offer services to franchise your business, you may stumble across some “do it yourself” franchise calculators (see some tips on how to research companies that claim to offer franchise development services). These franchise calculators are intended for you to plug in some different numbers (for example what you want your royalties to be, how many franchises you expect to sell in one year, average revenues, etc.) and the franchise calculator will give you a magic dollar amount that you will make franchising. However these franchise calculators don’t take into account all your other expenses to support franchise activity. So sure, you could plug in some numbers, but when all is said and done in reality you may only get a fraction of what is being recklessly predicted.
Do it yourself franchise calculators are dangerous, risky and deceitful. They only give you a superficial view, tempting you with what you think you are going to make franchising. And that is assuming that the numbers you are plugging in are even realistic based on your deliverables. Unless these franchise calculators take into account ALL other variables in franchising, they are intended to lure you into using their services not unlike a predator would lure a child into a dangerous situation.
Hold Them to It!
It is extremely reckless for someone to throw some type of number out there as to how much money you are going to make franchising. If anyone is doing this or giving you a magic number then we highly encourage that you ask them to put that in writing and most importantly hold them accountable to it a year later. You will be hard pressed to find anyone who is willing to adhere to your request. Why anyone would give you a number representing how much money you will make franchising… we don’t know, but again, if they do we encourage you hold them to it.
So when you are thinking about franchising your business and talking with people and companies who are telling you how much money you can make franchising your business, pause for a moment. Think about this article. We don’t know of any attorney or ethical person who will make such a claim. You may quickly realize that the strategy of telling you how much money you can make franchising is nothing more than a sales tactic used by a salesperson to get your business (check out our article that discusses what to look for in a franchise development company).
At The Franchise Maker we operate differently. No false promises or claims, no gimmicks and no games (read about gimmicks to avoid when looking for a company to help you franchise). As a client we train you on all these variables that affect how much money you can make franchising. Keep in mind you should be franchising because you want to get your concept out there and help other people be successful. If your intent is genuine, money always follows. To learn more, call us directly at 1-877-615-5177. We will have an honest, non-intimidating, non-threatening and non-salesy conversation with you.
- How Franchising Makes Me Money
- Do You Need to Show a Profit to Franchise
- How to Determine the Franchise Fee
- Royalties versus Franchise Fees
- Advantages of Franchising Your Business
- Should You Franchise to Increase Your Sales
