You’ve heard owning a franchise can be very profitable, but you have no idea how much money you can make owning one. Though there are many success stories out there, to ensure you don’t blow your wad on an investment that isn’t right for you, it would probably help you find out exactly how much money you can make
Each franchise is different in terms of fees and royalties. The most affordable real property management franchise cost is about $50,000 liquid capital and a $59,900 franchise fee. Read on to learn how much money you can make owning a franchise.
Income Potential
The profit margin on franchises varies widely depending on the type of business and whether or not it’s an established brand name that customers already know and trust (like Mcdonald’s). Some franchises can have margins as high as 50% or more, while others might have margins closer to 10% or less
Let’s take a look at an example:
If a Franchise costs $30,000 to buy into, it’s worth $100,000 in annual revenue. The total annual profits are $50,000 ($100,000 – $40,000 (the cost of doing business)). You’ll be making four dollars back for every dollar you put down on this franchise opportunity (or 25% return on investment).
The income potential of owning a franchise is dependent on several factors, including:
- How much capital do you have? The more you have to invest, the more money you can make.
- Your industry. Different industries have different income potentials. For example, fast-food franchises tend to produce lower incomes than other businesses since they require a lot of labor and not much capital. On the other hand, cleaning franchises usually do well because of low overhead costs and large profit margins.
- Your location. Your business’s location can also affect your income potential since it determines how many customers will come in each day and how much you can set prices without losing their loyalty.
80/20 Rule
The 80/20 Rule is a principle that states that 80% of your revenue will come from 20% of your clients. If you have 100 clients, 80 will account for about 80% of your total sales.
This rule is valid because many franchises have developed systems and processes specifically designed to help them attract and retain customers at scale. These systems provide consistent service across all locations, increasing customer satisfaction, and loyalty while lowering overhead costs associated with hiring employees or managing inventory at each location separately (which could be costly if done poorly).
Medium Income Data
While it’s true that some franchises have high-profit margins, others have lower ones. The median income data for the franchise industry can indicate how much money a franchise will make for its owner. The median income for a franchise is $128,000.
For example, Owners of food franchises make on average $75,000 a year. When you add franchisees with less than two years in business, the average drops to just under $50,000. That number includes companies with high profits and low profits. If you’re looking at franchising as a way to make money, you’ll want to consider this figure when determining whether or not it’s worth your while.
Factor the Risks
You will be responsible for paying a fixed franchise fee, an initial investment for your location, and ongoing operating costs. The franchise fee is a one-time charge from $10,000 to $100,000, depending on the size of the franchise you purchase. It covers the franchisor’s legal fees and some of their other expenses in reviewing your application.
Your initial investment will vary depending on the type and size of the franchise you choose. While it’s difficult to project exactly how much operating costs will be for any given business. They include rent or mortgage payments, utility bills, permits, payroll expenses (yes — employees are one of those pesky operating costs), insurance payments, and tax filings.
In addition to these financial obligations involved in purchasing a franchise, personal liability is also involved in owning one. If your business fails or loses money, creditors could sue you personally if they feel that it has been mismanaged or is not financially solvent enough to pay its debts.
These numbers should get you thinking about how much money you can make owning a franchise. They’re based on averages, but the numbers vary greatly depending on location, marketing efforts, and several other factors. The bottom line for most people is that it’s worth investigating if this is an opportunity worth pursuing. Your next goal should be to visit their corporate headquarters and seek out more details to see if t
