Business Opportunities Weblog

May 18, 2007 by Rich Whittle | 2 Comments

BusinessWeek:

If you have asked a franchisor this question, you may not have gotten a straight answer (or one at all). The main reason lies in legalities. The Federal Trade Commission (FTC) has strict requirements for franchisors about how they can present earnings statements to franchisees.

Earnings claims must be provided in writing in the Uniform Franchise Offering Circular (UFOC) and all material information must be accurate and substantiated.

Aside from the law, franchisors are in the business of wooing franchisees. Producing earnings projections and statements takes effort and money, time and money not spent on marketing and sales efforts.

Also, the honest results may not be attractive enough to help secure franchisees. One way to get a straight answer is to ask current franchisees about earnings potential.

Generally, you would expect your income to be higher for franchises that require higher investments but there is no guarantee.

The rule of thumb for a passive investment is that you should earn 10 to 15 percent ROI over time, however most franchisees are not passive participants so the opportunity to make more money could be substantial.

Again, there is no locked-in earnings guarantee. Franchises typically yield earnings of at least 30 percent of their total investment annually, which you could reasonably expect to reach by your third year.

The ultimate goal is to clear at least a six-figure income but it may take a few years to reach this level.

Photo by MSDesign.

In Franchising, Startup, Strategy | 2 Comments