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.
FranchiseBrief.com on May 20th, 2007 at 4:03 pm
Earning claims don’t have to be in the UFOC. About 75% of franchisors disclose their Item 19. If a franchisor doesn’t want to show you his earning claims, they probably not that good…
LJ from YourFranchise.com on July 30th, 2007 at 7:27 am
I actually sat down with a new franchisor since I am interested in investing in a local franchise. He dodged the answer with regards to earnings. I recomend you check with existing franchisees and ask how business is doing. Make sure that you talk to franchisors who are not necessarily area developers, so that you can get a better, unbiased opinion.
LJ