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Forum Newbie
Group: Forum Members
Last Login: 1/31/2008 10:26:55 PM
Posts: 1,
Visits: 5
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I am just doing research before I plunge into purchasing a franchise. I would like to know what is a good average ROI after purchasing a franchise and what length of time should I expect to make a profit before I throw in the towel? Can one be financially successful doing this, I am sure there are a lot of variables. I currently make $65,000/year. Just curious if the investment and profit will be worth the salary I am making now. I am experiencing career burnout  and need a new direction. I am considering returning to college OR starting a business franchise. (I am more passionate about a franchise because I want to be my own boss. ) Thanks for your feedback. Jill W.
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Junior Member
Group: Forum Members
Last Login: 9/22/2009 9:09:48 AM
Posts: 24,
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| Great questions. First, the buyer beware warning... most franchisors will not tell you what they beleive the ROI on their business will be. You'll need to look at any "earnings claim" information presented in item 19 of the franchise offering circular (UFOC) and make some projections either on your own or with your accountant. If you're not numbers savvy - like me - you'll probably want to get with a good accountant to help you take a look at opportunities. ROI is going to depend on a number of factors including financing costs, labor variables, real estate cost variables, changing cost of goods sold, etc. If I was in the market to start a franchise, I would be looking for a 15% ROI by year two or three after the business pays you a management salary since you intend to leave your job. As you consider this path, I think it is important to keep your priorities in focus and make sure that the franchise you select and are awarded matches well with your personal and professional interests and your lifestyle, income, wealth and equity goals. Most franchise agreements have terms that range between 10 and 20 years. Its a big commitment. What will your life look like in 15 years and will the opportunity you select get you toward your short and long term goals for wealth and equity? Once you’ve found a few opportunities to compare, you should reach out and gather as much information as possible both direct from the company and from related trade-journals, online sources, and others. If you’ve never experienced the brand and its services before – go visit a location and check it out. As a franchisor representative, nothing signals commitment to me more than someone who has done their homework and visited one or several of my locations. If you’d like to take a look at the company’s UFOC (offering circular) in advance, it may be available for free online within the Corporations California Electronic Access to Securities Information (Cal-EASI) Website @ http://www.corp.ca.gov/caleasi/caleasi.htm. Once you’ve downloaded the document or received a copy from your franchisor, I’d suggest you answer the 25 questions listed in this standard questionnaire http://docs.google.com/Doc?id=dj52qw4_6gkmjcc which will guide you to much of the pertinent information you should know going into your franchise deal. If this all sounds a little daunting - you may want to reach out to an experience broker to get you connected to a few franchised brands that would be suitable for you. I'm sure there are many listed on the supplier forum or who would offer services if you posted hered. Good Luck! Regards, Jamie
Jamie Griffin, CFE
Actualize Services | www.actualizeservices.com
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Forum Newbie
Group: Forum Members
Last Login: 8/23/2008 11:36:45 AM
Posts: 5,
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Jill,
Jamie just gave you about the best answer you could get. Do your homework, especially concerning he numbers. One of the things you should do is not only visit various existing locations, also talk to the owners. Have a specific list of questions. There are ways to ask if they are making money without seeming nosy. Ask what their profit goal was when they purchased the franchise, then ask have they hit that goal. Ask other questions like this (their expectations vs reality). Another great question is if they could do it all over again, would they purchase a franchise and would they purchase THIS franchise? Then watch their body language and listen.
I wish you much luck!
Paula Serber
Business and Franchise Loans
619-793-5559
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Forum Newbie
Group: Forum Members
Last Login: 6/28/2009 6:09:43 PM
Posts: 1,
Visits: 4
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| Jill - It's critical to consider the preparation of a profit and loss proforma for years 1-3. While most franchisors avoid this for legal reasons, it's important to take an objective look at two issues. Take a look at the UFOC. First question - when will I reach break-even or cash-flow neutral and second, how much cash will I need to have available until I reach break-even? Your start-up expense schedule, from franchise fee to build-out to initial inventory, etc. will tell you how much cash and debt you will need to get open. Add this to a realistic cash required until break-even, and you will have an eyes wide-open scenario of what to expect. Howard (Visit my franchise blog - howardwillis.wordpress.com)
Howard J. Willis
Visit my franchise Blog - howardwillis.wordpress.com
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Junior Member
Group: Forum Members
Last Login: 6/22/2010 4:20:38 PM
Posts: 10,
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| Jill, I recently decided to take the plunge into the world of franchising. My family has owned a small business for 18 yrs and I finally convinced family members that we need to make our name and quality service available for others to purchase. The first thing I did was contact a franchise attorney! You can post questions on forums all day long and not get any reliable or useable information... I started my lawyer search in the phone book and failed miserably but did a google search for franchise law and found http://www.myfranchiselaw.com/...I'm from MI and it turns out there was a very expirienced attorney right in my area...but you can search their directory for lawyers in your area  Don't waste your time...get professional advice Good luck!
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