Watch: How Much Money Can I Make Owning a Franchise?

Most aspiring entrepreneurs ask, “How much money can I make owning a franchise?” The truth is that several factors affect the potential income, making it quite variable.

Watch: How Much Money Can I Make Owning a Franchise?

In this on-demand webinar, Franchise Business Review’s CEO, Eric Stites, addresses the question: How much money can I make? Eric explains how smart franchisees can anticipate and better manage some of the influencing factors to their financial success. Watch now to learn:

• The average annual income of a franchise owner
• What to expect in your first year of business
• Best practices for long-term earning potential
• What to look for when comparing franchise opportunities
• How to “read the fine print” on a Franchise Disclosure Document (FDD)

Exploring Franchise Funding Options

Franchise investment costs vary greatly. Many financing options are available for nearly every price point and industry. Franchise Business Review has partnered with Benetrends Financial, a leader in franchise financing, to provide potential investors with the guidance they need to find their ideal funding solution. Complete the form below to request a complimentary franchise funding consultation with a Benetrends Financial Analyst.

Resources

Visit the Franchise Financing Resource Center

Webinar: Expert Franchise Financing Advice from Benetrends Financial 

Unlocking Your Potential – Elevating Franchise Financing Options

 

 

Transcript of the How Much Money Can I Make Owning a Franchise Webinar

Allison Dudas (00:00)
Hi, I’m Allison Dudas. I work in the marketing department here at Franchise Business Review. Typically, I come on here and I get to talk to franchisees and have them share their experience owning a franchise. But today, I’m joined by Eric Stites, the CEO of Franchise Business Review. Eric started FBR about 20 years ago and is an expert in the field. And today, he’s tackling the question of how much money can you make franchising? Thanks for coming, Eric.

Eric Stites, FBR (00:27)
Well, for having me. I’m glad to be here today. And, I’m glad to answer the how much money question because it is the most important question that people want to know. as Allison mentioned, I’m Eric Stites with Franchise Business Review. as we go, I’m going to talk, cover a lot of stuff pretty quickly.

let’s spend the next 30 minutes or so really getting into understanding those key drivers of a franchise investment.

I’m sure many of you have lots of questions around that. Before we get started, I want to talk about who is FBR. As Allison mentioned, I started the company 20 years ago.

And what Franchise Business Review does is we are essentially the consumer reports of franchising. people are like, well, what does that mean, Eric? what we do on a day-to-day basis is we survey existing franchise owners across hundreds of different brands in the industry. they might be operating a Dunkin’ Donuts franchise or, a childcare franchise or, whatever franchise they might be.

we survey those individual franchise owners and we ask them questions about the training and support they’re getting and do they like the franchise system and is the financial model lucrative for them? Are they making any money? Which is what we’re talking about today. basically we ask 33 benchmark questions about their satisfaction with the brand that they invested in.

And then we do awards each year for brands that have the highest franchisee satisfaction across the industry. so…

there’s a lot of things you need to consider before you buy a franchise investment. We’re going to talk a lot about that today. But certainly franchisee satisfaction, I think, is one of the most important factors to consider. I highly recommend checking out our website at franchisebusinessreview.com. All the brands listed there, it’s over 200 brands, have the highest franchisee satisfaction in the industry. of the thousands of companies out there, these are the best of the best.

So check those out. I also want to mention that I am very pro franchising. think the franchise industry offers a lot of opportunity for folks to own their own business.

in what we like to say in franchising is it’s in business for yourself but not by yourself. And again, we’ll talk a lot about that today. It’s kind of a business ownership with some guardrails and a proven business concept.

There’s also things that you need to consider about some of the cons, of owning a franchise business and just being a business owner in general. Business ownership is not for everyone. It’s a lot of hard work, whether you own a franchise or not.

and so not everyone is, cut out for that. I’m going to talk a lot about, some of the pros, some of the cons, some of you may get scared by this presentation and run away, and, say, I’m never going to, touch a franchise opportunity. And that’s okay. That, that means I’ve done my job in, educating you about what franchise ownership is really about. I think it’s great. I, again, I think it’s great for a lot of, a lot of folks, but not

everyone. hopefully you get a lot from the presentation today.

If you can’t stay for the whole time, the answer to the question of how much money you can make is $142,276. And I know that’s kind of specific. What that number is, it’s kind of a joke, but it’s real. It’s based on the data that we’ve surveyed franchise owners in the last 18

months. So every year we survey 30 to 40,000 franchise owners across the industry and this is the average number that they report as their pre-tax and we’ll talk a lot more about that later pre-tax income. So money they take out of the business as their salary as the business owner.

this number is a good starting point, but it’s not all that useful. This number is an average of…

people that own one location, one business, it’s people that own 10 or 15 locations of a certain business, it’s people that have been in business for two years, people that have been in business for 20 plus years. so averages, as you’ll learn, can be very deceiving. I think it would be a big mistake to come into franchising thinking that in your first year as a franchise owner, you’re gonna make $142,000.

possible but very very rare and again this this is something that you need to really dig in and do your homework to help you answer that question and we’ll talk a lot about how you can do that.

What I’m gonna do is share a whole bunch of nuggets today. I think there’s 14 of them. And hopefully, again, you’ll all find them useful.

Certainly McDonald’s is one of the largest brands. Been around a very long time. think probably everybody knows McDonald’s or Dunkin’ or Pizza Hut, whatever it might be. But franchising is extremely diverse. Franchising comes in many different shapes and sizes, investment levels.

So my first nugget is to keep your mind open to different opportunities because there are thousands of franchises that you can choose from in every imaginable industry that you can think of from automotive to child services and travel and hospitality.

Food and beverage obviously is a popular one, but again, there’s many different franchises out there. what I always tell folks is, you might be interested in a certain industry, but keep your eyes open, kick the tires on a couple of different things.

don’t just narrow in on one brand right out of the gate. Look at, various brands and compare and contrast those and keep an open mind. you might come in looking, thinking you’re going to own a food franchise and turns out that, you find an education franchise that really gets you excited. so, nugget number one, keep an open mind.

nugget number two is really the big why. Why are you doing this? And really this whole process should start with kind of a self-introspection of what’s motivating you to go into franchising or thinking about going into franchising right now.

maybe you’re in a job that you don’t like, maybe you recently got laid off or maybe you’re, been in the corporate world your whole career, and you’re looking to, have something that’s more of a lifestyle business. there’s, there’s a whole lot of reasons people get into franchise ownership. And that really needs to start with your self-introspection as to, what’s motivating you because, you can’t find the right franchise for you if you don’t know

know

what it is that you’re looking for. And with that, what I always recommend to people is, it kind of breaks down into two large groups. There’s a lot of people that are essentially replacing their job. They want to own their own business, and they’re going to work in this business, and that’s great. Franchising has a lot of opportunities for that. And then others approach it really from an investment standpoint.

They may be operating the business at least for some period of time, but they’re also thinking about, buying 10 locations of something or, building more of an empire. regardless of your reason why is you really need to treat it from an investment perspective because there’s a lot of different places that you can put your money, whether it’s the stock market or real estate or some other business investment.

that can give you a different return on that investment. And at the end of the day, this is a business. And yes, you gotta be passionate about it and you gotta work hard and all of those pieces. But at the end of the day, you wanna look at what is that return on investment? And we’ll try and help you figure that out today, or at least give you the tools to start figuring that out today. And make sure that that’s answering your why.

every business owners have their ups and downs and their frustrating days. But hopefully if you’re passionate about a business, passionate about the industry that you’re working in, you’re going to have many more good days than bad days and be much more successful because of that.

what’s interesting is most things in life.

the higher the price, the higher the quality of that product or service. And that’s not necessarily true in franchising. one thing I would definitely tell people is don’t let price blur your perspective.

Understand, your why and what your goals are, what your investment range is. Certainly it’s important to understand how much of a business you can afford. But just because one franchise costs more than another franchise, don’t let that make you think that that is a better performing franchise. just because a business may be cheaper than other businesses out there, don’t

Don’t dismiss it and think that ⁓ it might not be a real opportunity because there’s some businesses out there that are very very affordable and are great from a return on investment standpoint, and then there’s other businesses out there that are extremely expensive

And the return on investment is often not nearly as good as it should be. you have to understand, how much business can you afford? what is the best fit for you and what business is going to help you get the most return on your investment without comparing, that business that costs a half a million dollars must

be better than this business that only costs $250,000 or whatever the case may be. And that was nugget three. So understanding your goals.

really understanding that investment level. Nugget number four is reading the fine print. And this slide is kind of a joke. It’s purposely meant to be very hard to read. you’re gonna be presented with all sorts of financial information as you look at different franchise opportunities, whether it’s financial information or additional marketing information from the franchisor. make sure

that you really read the fine print and understand what’s behind that information or if it’s specifically financial information, what’s behind those numbers. Just to give you an example.

I should say franchising is a regulated industry. At the national level, the FTC, the Federal Trade Commission regulates franchising and there’s certain requirements that franchise companies all in the United States have to meet. And then certain states also have additional regulations. Not every state, but there’s a handful of states that also have state regulations. because it’s a very regulated industry, they have to follow certain rules.

especially around presenting financial information. just as an example, there was a pizza concept, came out about a dozen years ago or so. They were running an ad at one point that basically said, make $1.2 million a year.

And great, very good ad, attractive ad, got a lot of attention, obviously. And if you read the fine print along the bottom of those ads, it basically said that the sample size on that $1.2 million a year was based on two of their corporate locations, and it was during a six-month period of time, probably their high season. they’re not lying.

that was truthful information, but not.

representative of what you as a franchisee are going to do in the business. It may have been two of their top performing stores. It was in their home market. it’s not an apples to apples comparison to what your experience may be in your local market. when you read these financial numbers

ask hard questions about what’s the data behind those numbers. Is this a sample size of your whole network, or is this just a limited sample of top performing corporate stores? So that’s nugget number four.

number five what I would like to do is just have people chime in in the chat window have you ever owned a business before? Yes or no? Just a simple yes or no into the chat box will help me understand. most of you have not owned a business before. Some of you have, but most haven’t. And so, what you really need to understand

businesses typically will lose money for a period of time we typically refer to this as the startup phase and you really need to understand how long is that startup phase to begin with and in franchising Franchise companies are very good at explaining the initial investment that that little red bar on the left

And basically, what does it cost to get the doors of that business open? This is one of the items that’s regulated, and we’ll talk more about that towards the end. But they are,

Very clear, and they’ll explain it in a range. So it’ll be typically a low or a high range depending, obviously there’s different markets all over the country. so opening a business in Los Angeles may be very different than opening in Omaha. they present that information in a range from high to low and what their experience has been with their franchise owners. So that they’re very clear on.

Many franchisors, not all, but many are also very clear on what their average sales are. And again, you have to ask, is this representative of the whole system? Is it just a selection of their top performing stores? But today, most franchise companies will give you some idea of what their average sales are across their system. Where they get a little fuzzy is that

red bar, all those red bars in the middle. So again, you open the doors day one, you’ve got employees, you’ve already made the initial investment, but you’ve got operating costs. And for some period of time in most businesses, you’re going to lose additional funds, additional capital. And then hopefully at some point, that starts going the other way and you get to a point of break even. But you need to understand, what is that time period?

know six weeks is it six months is it two years? It’s all over the map depending on the type of business that you get into But really having a good understanding of that is is critical and Where you’re gonna get that information the best resource for that information. I’m gonna give you a nugget six here is Talking to franchise owners. So when you’re and this is several, Probably months down the road when you’re doing deeper due diligence

on specific franchise brands, talking to franchisees that are in that business is gonna be your best resource to get real information. don’t pick up the phone and call a franchise owner and be like, how much money did you make last year? Because they’ll just hang up the phone.

But if you do your homework and you do your planning, and again, we’ll show you some tools to help you get to some of those answers. And then if you go and visit a franchise owner or pick up the phone and call a franchise owner and develop that relationship and understand that you’re serious and explain how you’ve done your homework, they’ll be very happy to help and explain what their experience may be.

doesn’t guarantee you that your experience will be the same, but at least it gives you some perspective that, it took me six weeks or hey, it took me six months. understanding that and talking to different franchise owners and different types of markets, especially, markets similar to your own is obviously the best case.

So another poll question, just a quick one here. How many of you consider yourselves below average performers? you’ve got three options here, below average, average, or above average. So just chime that into the chat window and let me know. Yeah, so I figured, you know, not many below average people out there. And so, you know, again, Eric, you’re so funny. ⁓

But the message here is really, everybody thinks, they’re top performer, right? franchisors are the same. they all think their systems are great and many of them are. but nugget number seven is you need to plan for average. what I mean by that is, you’re going to talk to many franchise companies and they’re going to share all their great success stories, those best case scenarios, which is great. We all, we all like to talk about those.

things. worst case scenarios, the people that failed in the business or the people that struggled, those typically don’t get talked about a whole lot. when you’re doing your planning for whatever business it is that you’re thinking about opening, you want to, do your planning based on average. So plan for average.

certainly have a plan B, a plan C, a plan D as a backup plan. So if things don’t go quite as planned and need additional funds or you need to work more hours or whatever it might be, having that plan is important.

certainly work your butt off to make the best case scenario happen. but if you’ve, if you’ve planned for, most likely, and also done some kind of plan B plan C plan D planning around, okay, what if it takes me three months longer or six months longer, or even a year longer? what, what will I do? and if you’ve done that kind of scenario, it will certainly help you when you get into the situations. Cause I can guarantee you in

any business, things won’t always go exactly as planned.

so nugget number eight is bankers love to lend money to people that don’t need it. If you’ve got lots of capital and a lot of equity in your home and a lot of collateral, bankers will lend to you every day. If you are you six months a year into a business that you’ve invested hundreds of thousands of dollars in so you’ve got some debt

maybe it’s taking you longer and you’ve got additional debt. That’s when,

bankers are a little squeamish about providing additional funding at that point. your plan B can’t just be if I run out of money, I’m going to go to the bank because realistically that’s probably not the best option. You should talk to bankers and I encourage you to start developing those relationships now. Go out in your local community and go to some business networking events and talk to business owners about who they bank with and who are

kind

of those best relationships as far as small business ownership, because those are great connections to have. as you develop your plans and get a little bit further down, then you can share specific financial plans with them and get their perspective.

So another quick poll question How many of you would like to make? ⁓ $61,000 a hundred and fifty six thousand dollars or 1.2 million dollars. So chime chime in your response there Yeah, it seems like we’re getting mostly 1.2, which is again smart Wouldn’t we all

So, obviously again, kind of a silly question, but going back to my scenario I used earlier with the pizza company is that, you’ve got gross sales as your top line. So how much money does the business make selling either the product or service that they’re selling? That’s your top line revenue or gross sales. But out of that comes, cost of goods or what they call cogs. And so

things like, whatever the cost of the product is, supplies, those sorts of things are your cost of goods. And then you get to this number that’s considered gross profit, and I hate that term because it has nothing to do really with profitability.

then after that you take out all your fixed operating expenses and in the case of a franchise business Royalties are included in that and royalties are the money that you’re paying generally on a weekly or a monthly basis back to the franchisor For the privilege of you being part of their franchise system and all the pieces that come with that

But those royalties are typically not something that you’re paying as an independent business owner.

And then you get to this number that’s called, EBITDA, which is earnings before interest and taxes and depreciation and amortization and all of that. And you take those pieces out and you get to a net income number. nugget number nine is that this is the profit of the business. And as a business owner or a prospective business owners, a lot of people think that net income

number is their income, their profit. That may be true in certain cases, but in many cases it’s not true. So there’s a whole lot of other stuff, business reinvestment, taxes, debt, repayments, all of that stuff that comes out of that net income number before you get to what your take-home number or your salary or your

profitability from the business that really influences your personal wealth.

again, walking through my pizza example, top line sales, $1.2 million. Excellent job, selling pizza. I’ve got a $1.2 million business. Well, my cost of goods were a little over 300,000. My expenses, 660, royalties back to the franchisor were 5%. So that’s a total of $60,000. Now, again, on the royalty note, you’re typically paying that percentage

on top line sales, not profitability. A lot of people don’t understand that. So they’re like, well, if I’m not profitable, I don’t have to pay the franchisor that’s not true. You’re typically paying royalties right out of the gate on top line sales, regardless of your own profitability. in this case, you break that down, you get to a net income of 156,000, 13 % profit margin, gross profit margin, if you will.

not terrible. a lot of people would be happy with $156,000 in income. Well, again, that’s not the bottom line. So out of that, you got to pay taxes, both.

at the federal level and at the state level You have loan repayments, assuming that you’re not capitalizing this fully yourself that come out of that number. And then you also have to plan for the future. And so as a pizza restaurant owner, I have to put some money aside for future remodeling or maybe I need to put some money aside for a new sign

or whatever it is, you have to constantly reinvest in that business. depending on how you’re structured, and we’ll talk more about this later, but a lot of that money you put aside still gets taxed first as profit. Many businesses are LLCs, and if I’m saving for an investment, I need to make two, three, four years down the road. Oftentimes that money is taxed now.

even though I’m not spending it. And so it’s important to talk through that with an accountant and we’ll talk more about that later. But now this is that scenario where again, top line sales are 1.2 million, net income of 156. The take home to the owner was only $61,000.

that may be good for some people. Other people might just be like, that’s crazy. And, and certainly in this scenario, if you own, three, five, 10 of these locations, that’s certainly then an exciting proposition. But again, it’s important to understand in the business that you’re looking at how these numbers break out and the percentages and how they fall in your favor or not. so nugget number 10 is

get financially educated and you don’t have to be a small business finance major or an expert, an accountant or anything like that, but you do need to understand an income statement and a balance sheet and how cash moves through the business. And so, when you acquire a business, you’re buying assets which exist on your balance sheet and use those assets to drive sales and hopefully profit, right, in your business.

on the left would show up on your income statement. out of those profits, as I said, taxes kind of leave the business. Business reinvestment goes back to, acquiring more assets to drive more sales and keep the whole thing going. Hopefully you’re paying off your debt, which is going to reducing your liabilities. And then, ultimately, hopefully there’s money left over that you can put away both money for retirement

to help build your net worth as well as some take home income so you can survive. So really getting a good understanding of how cash flows through your business potentially.

And there’s a lot of great resources online, Small Business Administration, the SBA has resources online as well.

get financially educated to understand what their business is really gonna be all about. And so, it’s all about understanding what’s going into this business, what’s going out of this business. And at the end of the day, that’s the ROI,

and understanding all of those pieces is critical. So what I wanna do is just pause there for a second. I know I’ve covered a lot. I’ve been talking pretty quickly. Allison, do we have any questions that I can respond to?

Allison Dudas (24:39)
Yes, so I wanted to go back to the expenses. I know you were using the pizza company as the model and I wanted to make sure based on a question we just got that expenses would be things like employee salary or rent Right if it’s a brick-and-mortar business, correct? Okay. Okay, great

Eric Stites, FBR (24:58)
Yeah. Yeah. Yeah.

Yeah, so, typically the way, your expenses, cost of goods and, your operating expenses are kind of those two big categories. so typically from an accounting standpoint, the cost of goods are kind of the variable things. So like if you’re a pizza restaurant, if you’re doing $5 million, you’re going to need to buy more flour and dough or make more dough than, somebody that’s doing $1.2 million. And so those are those variable

cost of goods. and certainly employees play into that too. You need more employees and more time if you have a bigger business. And then other operating expenses are, typically fixed expenses. like your location, insurance, and we’ll kind of talk through like what some of those are in a little bit.

Allison Dudas (25:48)
Right, and I also received a question about the typical cost of buying a franchise, which I think is an interesting one considering we just talked about if you’re having a brick and mortar versus something you haven’t necessarily mentioned if you are purchasing a business where you can work from home, right, and maybe it’s just you. So what are the variables there with the typical cost of buying a franchise?

Eric Stites, FBR (26:06)
Yeah. Yeah.

Yeah, it’s a great question. and I think this is kind of the piece that a lot of people don’t know about franchising is there’s franchises that start, with an investment under $10,000. You mentioned, the kind of work from home.

travel franchises. That’s a very popular category. so basically that business model is you’re essentially a travel agent selling vacations and cruises and you work from a home office. so very, very low overhead and very limited or very low initial investment to get in. we publish a list. If you go to a franchise business review, you can actually look at

the low cost franchises list that’s available on our site. we define low cost as investments under $100,000. Obviously $100,000 is still a lot of money for a lot of people. The typical franchise or the average franchise investment is probably closer to 200, 250.

And then, obviously there’s businesses that cost ⁓ in the millions. the important part to think about though there is that buying a business is a lot like buying a house.

And so when you buy a house, obviously you might buy a $300,000 house or a million dollar house, but you’re not putting all that cash down, right? franchise businesses are very much the same. You’re putting some money into it from your savings or other capital that you may have. And typically you have a business loan and financing that over time. it’s all

over the map, but generally speaking, bankers are going to require you to have about 25, 30 % in the business. So if you’re looking at a, $100,000 business all in, you can probably put in, 25 or 30 and finance the rest over, a five or 10 year period of time. Again, it’s going to depend on the business and the model and the history of the company. But you don’t need to put all that money in upfront.

let’s buzz through the rest of this and we’ll hopefully have some time for a few more at the end. nugget number 12, to drive this home is that, regardless of what business you’re thinking about buying,

or investing in what industry, you need a plan. it’s a pretty complex process, but we’re here to help you do that. one of the tools that we have, we like to call My Franchise Life Plan. And life is simply an acronym for L for Liabilities, I for Income.

F for financial wealth and E for equity. those are all the key pieces of any business ownership. And this is simply just a worksheet to kind of help you walk through, what does that investment potentially look like? I know this is small for a lot of folks, this at least gives you a sample of, what some of those common startup costs are.

And again, a good franchise system is going to provide you very detailed information about what those typical startup costs are and what those ranges are. The bottom line here is not what the franchise or is going to provide you, but it’s basically your living expenses. so, again, most businesses don’t generate cash flow immediately. It’s going to take some time. And so if you

don’t have the ability to maybe live off your spouse’s salary for a few months or maybe you have other capital that you can live off of. If you need money from day one to take out of that business as a salary for your living expenses, that’s above and beyond the capital that the business needs. so when you’re talking to bankers, it’s important to understand what does the business need to be successful and what’s that kind of cushion in case

things could take a little bit longer. And again, what is your personal need? ideally that that number can be as low as possible while you’re getting your business up and running. And I tell people all the time that, if you’re thinking about owning a business, you should be saving every nickel and dime right now that you can cut your personal expenses as much as possible, the more personal capital that you have, the more savings that you can put into this and not borrow from somebody else, the much better.

off you’ll be. so this life plan walks through what some of those common things are and then helps you figure out a plan year one, year two, year three and what I tell folks is that

If you’re starting a franchise business, the typical timeframe on a franchise agreement is somewhere between five and 10 years. Often 10 years is kind of normal. if you’re signing an agreement for 10 years, you need a 10 year plan. And I can guarantee you, it’s not gonna go exactly as planned, but you at least need to walk through what that scenario looks like.

You’re going to put all this together and figure out at the end of the day, what does that cost look like? What are those kind of common expenses, marketing, people, all of that stuff, operational expenses? And put that all together into this five or 10 year plan. And then this also figures out, again, what are your liabilities if you’re taking

a business loan, what does that debt look like over time, if you are able to pull some money out for retirement, how does that track over time to help you build your personal wealth. the important part about business ownership is understanding what is this asset your business worth at the end of the day? Because that’s the difference between having a job and owning a business is hopefully at the end of the day your business is worth something.

what a lot of people don’t understand when they think about a franchise is that, yes, you’re licensing the business model from the franchisor but you own that business at the end of the day. so hopefully that there’s some value there. And franchise businesses sell in many cases if it’s a good business for hundreds of thousands of dollars.

so, again, ⁓ it’s a lot of work to populate this document. again, it’s later stage in the process when you start to do this.

But anybody can scan this QR code. It’ll take you to franchisebusinessreview.com and you can fill out the form to download the document. ⁓ certainly,

Allison Dudas (32:06)
the link below in our resources section once this is posted. Yeah.

Eric Stites, FBR (32:09)
⁓

great, great. Click on the link below. great, great exercise and, and will help you work through some of those important numbers in working with an accountant and coming up with a good plan before you jump off the cliff.

So as I said earlier,

The nice thing about franchising is it’s a regulated industry, regulated nationally at the FTC, Federal Trade Commission, and then also certain states. every franchise company is required to have a franchise disclosure document or FDD. And so there’s 23 standard items in there that are typically reported out very similarly. So it makes it easy to compare one franchise company to another based on some of those items.

There’s a lot of information in there that’s important to look at. These are specific to the financial investment. So item five is going to be your initial fees, your franchise fee. So most, not all, but most companies charge a franchise fee to get in. And that kind of covers their costs to recruit you and train you to be a franchise owner. that’s just the initial ticket to play. Item six is going

going

to go through other fees. So this is where you’re going to see royalties broken out and advertising fees, maybe technology fees and other fees. And it’s important to understand what that total fee load is, so to speak. And then item seven, as I said earlier, is that initial investment range. And this is where they detail out what the costs are to open the business. And they break through all the different line items and give a low to high range based on the

different markets that they are operating in. ⁓ Item 19, what’s called an FPR or a Financial Performance Representation, This is where franchise companies will talk about unit level economics, so how much money, their locations, their outlets, maybe it’s a mobile business, they don’t necessarily have real estate.

And then item 20, which is really important to look at is the status of their outlets. So again, their locations, how many do they have? How many have they added over the last few years? How many have maybe closed over the last few years or transferred?

a franchise company may be churning through franchise owners, it’s important to understand that and that would show up in their item 20s that they would have a lot of transfers and people that were leaving the system there. And then item 21 is really cool because what this does is gives you the financial information of the franchisor and you want to invest certainly in a financially viable franchisor.

You need a great franchise attorney.

to kind of go through this with you I underline franchise attorney, not just a regular attorney.

Last nugget is get business educated. I talked about financially educated earlier. Get educated about business. So a couple of great resources.

Rich Dad Poor Dad, classic business ownership book, not specific to franchising, but certainly will help you understand what business ownership is all about. And then The Wealthy Franchisee is a great book. A friend of mine, Scott Greenberg, wrote this book a few years back. He was an Edible Arrangements franchise owner in the Los Angeles market for a number of years. Successfully turned around two stores that were not performing well and then

exited that business and sold it for much more than what he acquired it for. he tells that story in this book and it’s a great read for anybody thinking about owning a franchise business. other resources certainly beyond just our website. We have a great podcast. You can scan the QR code here. I’m sure the link will be in the notes below.

There’s a lot of great information there. I just want to wish you the best of success on this journey. feel free to reach out with any questions that you may have. You can email me directly at eric at franchisebusinessreview.com and, take your time, find something that you’re passionate about.

and make that investment and take that leap because again, think franchising is a great opportunity for folks that are looking for that next career step and if we can help, we’d be happy to. So, appreciate the time. I know we’ve gone a little long, so ⁓ we’re gonna do another series on Q &A to get all your questions answered. But I appreciate your time and I wish you the best of success.

Allison Dudas (36:22)
Thank you, everyone. Thank you, Eric.

Eric Stites, FBR (36:25)
Thank you.