The idea of franchise opportunities is appealing for many reasons, but one of the most common motivations is the idea that you can make a lot of money off of them as a franchisee. While there are other benefits that come with franchise ownership (being your own boss, investing in your community, learning a new business, etc), making a great living is a very appealing idea. Before you put on your top hat and monocle though, let’s ask the important questions to figure out how much profit a franchise owner can realistically expect when investing in this type of business.
How much does a franchise cost?
The best place to start is what you have to put in before you get anything out, and honestly, it depends on how much you want to spend! At Franchise.com, business can start as low as $10k, and can go for over $200k. For more expensive franchises, these are more iconic brands that have a lot of recognition and are in more desirable industries, like hotels or fast food restaurants. Franchises that are less expensive can be newer brands or franchises with fewer locations that aren’t as well known, or simply less expensive because of their model. Most franchises come with different levels of support, and the cost of your initial investment may reflect those levels of training and support that you receive. Most franchises require you to have liquid assets in order to invest, but there are usually some financing options that you can explore in order to get started.
Can owning a franchise make you rich?
It’s definitely possible to become rich as a franchise owner...and also possible to lose your investment. The truth is that most franchise owners are somewhere in the middle. According to Franchise Business Review, you should consider the 80/20 rule when thinking about franchise ownership as a wealth strategy. This rule means that about 20% of franchise owners have huge profits, own multiple locations, and legitimately become rich as a franchise owner. These top performers are successful at building their teams and running their franchises with high profits. However, 80% of franchise owners are not becoming “rich” off of their businesses but instead have more average incomes and profits. Some fast food franchise owners make less than $50,000 per year, although the average annual income was $120,000 for businesses that had been open for at least two years.
How much profit do franchise owners make?
Profits vary depending on many different factors. Some factors that can affect profits are:
Some industries tend to have higher profits than others. According to Forbes.com, a financial information company reported that hotels, motels, real estate agents and brokers, cleaning services, and beauty salons had the highest profit margins in recent years and are all franchise-friendly industries. The most profitable franchises tend to vary, so looking at industry trends is important to determine what franchise is right for you.
- Time and effort
In order to maximize profits, you will probably need to invest more than just money into your business. Your time and effort will have an impact on your bottom line, and dedicating yourself to the hard work of growing your business will most likely pay off in the end. The inverse can also happen - if you invest your money into a franchise but don’t do the hard work, then profits might shrink.
- Return on investment
Another thing to consider with profits is your return on investment. Your franchise might be making a lot of money, but if you are reinvesting that money into your business or not paying yourself appropriately, then your ROI might be low, making it not worth it. Purchasing a more expensive franchise with high profit margins might take you longer to make back your initial investment than purchasing an inexpensive franchise with medium profit margins. There are a lot of variables to consider.
What is the first step?
Do your research! Look at industry trends, figure out what types of franchises are popular in your area and identify gaps in the market that you could potentially fill. Check out the lists of franchises at Franchise.com and explore all the categories of franchise opportunities from ATM franchises to work from home opportunities. You can also find news, franchise information, and educational blog posts that will help you learn more about franchises, how they operate, and how they can work for you. Take your first step today at Franchise.com and who knows, you might just need to put on that top hat and monocle after all!