The Expected Earnings of a Franchise Owner
Franchising is a legal arrangement whereby individuals purchase the opportunity to sell a products and services under an established name and logo while following a formulaic business model. Like any business, expected earnings depend on the economy, size and type of business. Following the franchise’s proven model can lead to greater earnings potential than striking out on your own.
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Franchise Sales Reports
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One feature of buying a franchise is the franchiser providing you with sales, marketing and trending reports. Unless the franchise is brand new, the franchiser will have documented experience with what sells well and pricing for each product. When you purchase a franchise, it is in the best interest of the franchiser to help you succeed to preserve the franchise name. Sale reports include expected earnings and costs based on your size, location and similar franchises. The franchiser may disclose the earnings of other franchises and allow you to ask questions about sales projections.
Pros to Franchising
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When purchasing a franchise, you get automatic name recognition. Most franchises offer an established brand name, such as Dunkin Donuts or 7-11. Since customers are familiar with the company name and its products and services, you may find a built-in customer base, automatically generating sales. With the marketing assistance of your franchiser, you should see success, as long as you follow the franchiser’s business model and utilize their assistance and advice.
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Cons to Franchising
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While earnings from sales may come, you need to factor in franchise fees in your overall budgeting. These franchise fees range from the low thousands to hundreds of thousands of non-refundable dollars paid to the franchisor. Franchisors may require royalty payments -- a percentage of your sales -- and fees for start-up and advertising, among others. In addition to potentially expensive upfront costs, owning a franchise means you give up some administrative control regarding advertising, pricing, sales, products, store design and operating hours.
Unsuccessful Franchises
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Not every franchise is a success. Although you may follow the plan of your franchiser, competitors are not always welcome in an area that already has its share of your type of business. Some patrons may choose an established location instead of your new one. Franchises do not always provide exclusivity to a particular territory, meaning more than one of the same franchise can be located close to one another. In addition, straying from the proven formula of your franchise may cause failure. To maximize your earnings, choose you location well and follow the business model.
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