Show Me the Money!
I can’t tell you how many times I’ve been asked by someone thinking about investing in a franchise “How much money can I make?” It’s far and away the number one question prospective franchisee want answered. And why not? Isn’t money the primary reason most people go into any business? I love my job and the work I get to do helping people discover the best franchise opportunities in the marketplace today – but heck, if it weren’t for the equity I’m building as part of owning my own business, I’d rather be fishing!
When you ask franchisors the question “How much money can I make in this franchise?,” you get a lot of different responses. Some will look you straight in the eye and tell you they can’t answer that. Others will squirm and give you some completely unrelated figures that won’t answer your question. And then others will give you the straight scoop and some very detailed information that will give you something you can build some realistic projections on.
Now to be fair, there are many legal issues associated with a franchisor answering any money-related question to a franchisee candidate. Due to franchise regulations, any financial information related to sales, costs, etc. must be disclosed in their franchise offering circular (UFOC). Only 20-25% of franchise companies include any “earnings information” in their UFOC and therefore the remaining 75% technically can’t say anything.
Bottom line, any franchise company worth investing in will either provide you with earnings information from their UFOC or they will work with you to help you get the information you need. In many cases, this means getting the financial information directly from franchisees. Exactly how to go about getting earnings information from current franchisees is a whole other topic to be addressed in a future post (if you can’t wait, give me a buzz and I’ll fill you in).
One last thought, while many franchise companies run away for financial-related questions, Brian Scudamore, the Founder and CEO of 1-800-GOT-JUNK? takes the bull by the horns! Not only does the 1-800-GOT-JUNK? team work diligently with franchisee candidates to help them develop a very realistic budget and financial projections, they also provide a money-back guarantee! This is VERY RARE indeed! For any 1-800-GOT-JUNK? franchise partner that follows their system and doesn’t meet minimal sales of $100,000 their first year, 1-800-GOT-JUNK? will offer them the option of getting a refund on their franchise fee.
Hats off to 1-800-GOT-JUNK? for truly helping franchisees set realistic financial projections and then guaranteeing their results!
Eric Stites is the founder of Franchise Business Review, a franchise research firm based in Kittery, Maine. Send any franchise related questions to member nickname FranchiseGuy.