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V e t er a ns i n Fr a nchising

expert advice: Wayne Maillet | Franchise Management Consultant and Founder | Franchise Specialists

How Much Money Can I Make?

A common question asked by prospective franchisees that are reviewing a franchise opportunity is, “How much money can I make?” In response, the franchise salesperson avoids the question and assures you that you will have an opportunity to review the disclosure document and speak with franchisees. When you subsequently get the disclosure document you go to the earnings section and are faced with a statement that reads similar to the following: “The Franchisor does not give or authorize its agents to make any oral or written representations or estimates concerning the actual or potential sales, costs, income or profit of a franchise.” You then call the franchisees. Although they

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“Put together two cash flow projections: a best case scenario and a worst-case scenario. Plan for the best but be prepared for the worst. This will allow you to sleep at night.” are willing to answer most questions, they become uncomfortable when you directly ask, “How much money are you making?” How can you be expected to make a business decision and invest in the business when you are not provided with potential returns? This issue comes further to the forefront when you go to the bank and they ask you for a business plan with projections as part of approving your loan. They are looking for the evidence of the business being able to pay off the loan. Without this they are reluctant to lend you money. Franchisors can make earning claims provided they can be verified and substantiated. Many franchisors today provide average gross sales figures of their franchisees and some may have

clear earning claims in their disclosure, but several do not. Most franchisors find that the variance in earnings is so great that making any kind of a claim creates undue liability. Some franchisees are more creative than others in posting expenses, making it difficult for the franchisor to compare statements. With new franchisors, there is simply not enough of a track record to go on. Other factors influencing earnings include the franchisee’s management ability, operating efficiencies, competition, the economy and other local factors. As a result, it is almost impossible for franchisors to provide a reliable earnings claim. All of this makes it difficult for you to make a fully informed business decision. The good news is that this forces you to do

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FRANCHISING USA AUGUST 2019  

Franchising USA is a monthly consumer publication bringing you all the latest news, expert advice, and information from the world of franchi...

FRANCHISING USA AUGUST 2019  

Franchising USA is a monthly consumer publication bringing you all the latest news, expert advice, and information from the world of franchi...