We live in a world where people expect immediate gratification, and franchise owners are no exception – especially when it comes to turning a profit. However, as is the case with just about any new business, profitability does not come to most new franchise owners right away. Several factors can affect when a franchisee should surpass the break-even point and start seeing a profit, including how obstacles are handled, and how available tools and resources are utilized.
Estimating a Profit
Franchises compete in a wide variety of industries with numerous different business models, so there is no true benchmark of when a franchise will surpass breakeven. Additionally, things may not always be as they appear, as cited in this investigative report: “Item 19 of the FDD details the financial performance of the franchise and offers a snapshot of the average revenue a franchisee makes. But Item 19 is often calculated with a sleight of hand that would make a magician proud, with the numbers spun to put the system in the best possible light. The earning ranges documented can be so large (e.g., $50,000 to $500,000) as to be meaningless, if they are shared at all, since filling out Item 19 is optional. So, how much can you earn by opening a franchise unit? According to a large survey by the research firm Franchise Business Review, the average franchisee across the spectrum earns a profit of $66,000 annually. Beyond that, it’s hard to generalize, since there can be major differences between concepts even in the same sector.”
This is why it’s so important for prospective franchise owners to work with an experienced franchise development group like Rhino7, who can help navigate the treacherous and sometimes downright deceitful waters of getting into franchise ownership. The fact of the matter is that there is strong profitability in many franchise offerings, and Rhino7 makes sure its buyers get full disclosure on any potential purchase, to make sure they know exactly what they’re buying into.
See Success Sooner
The success of a new franchisee depends on several key factors – including how much he or she puts into the business. Is the owner going above and beyond (doing additional advertising, getting to really know their customers)? How closely do they work with the franchisor?
Based on this article on the Top 10 Most Profitable Franchises in 2014, there are several other things that can influence success and profitability:
- Brand strength – is the brand recognizable, reputable, and strong in the marketplace?
- Location – if your franchise is not favorably located, you can probably expect to see a longer payback period.
- Management – is the business model right for your skillset?
- Growth potential – is the franchise just a fad, or will it be around for the long haul?
There are obviously a lot of factors that affect the time it takes to make a profit. Some are controllable while others are not always predictable. With the right work ethic and strong support from the franchisor and/or franchise development company, new franchisees can expect to see profits sooner rather than later.
