Money Talk With Slater

Making Money Across the Board

Daily archives "September 14, 2017"

Is Opening a Franchise Worth the Money Invested?

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Hundreds of entrepreneurs take a leap of faith and invest in franchises as a way to get a part of the American dream. The temptation is possessing a proven brand concept and training and marketing support to increase the odds of start-up triumph. But for most, the main question each potential franchisee asks is: “How much money can I make?”

As part of a recent study, 50 franchisees reported on across the US offered annual gross sales figures, many going into the millions. But as part of the study, profit figures were reviewed for a big majority of star franchises. It was discovered that these franchises as a group average over 3 times the net income of the average U.S. franchisee.

For some, the benefit was beginning with a low-cost franchise and knocking the ball out of the park. Others were capable of generating a high return on investment, even at a bigger initial franchise investment. Remember, the franchisees on the list are stars, not just the average ones.

Sadly, numerous new franchise owners begin with improbable financial expectations and never accomplish the level of financial success they had dreamed of. It’s vital to know that depending on one financial figure gives a unrealistic picture of a franchise opportunity.

Keep the following tips in mind if you are a potential franchise business owner looking at opportunities.

Don’t be fooled by big, top-line numbers

As a business owner, your take home income will eventually come out of your business’s net profit or bottom line. While the gross sales/gross revenue of any company (“top line revenue”) may seem remarkable, it is crucial to know the profit margin of the business, the amount of money left over after all business expenses are paid out.

The result is your business bottom line most likely isn’t your bottom line.