How Much Does A Franchise Earn On Average?
Although experts say that it is critical for franchise investors to understand average earnings for any outlet in a franchise system, would-be franchise buyers find it is often extremely difficult. That’s because the industry as a whole doesn’t normally tell the buyer what their franchises make on average. And even when earnings are provided, they are presented in various forms. That makes it nearly impossible to compare one franchise brand’s earnings potential to another.
In a recent interview, I discussed this problem with Robert Bond, who has some two decades of experience researching earnings claims and is the publisher of World Franchising Network and the author of the book, How Much Can I Make? Highlights of our conversation follow. You can also read my in-depth article about earnings claims and listen to the audio interview.
“Just about every franchisor knows what its franchisees are making and they can make that information available. For one reason or another, very few decide to make that information available. Certainly the most important bit of information that a franchisee can get before he or she makes a $200,000 or $500,000 investment is to have a sense of what he or she can make. My sense is that very few [franchise buyers] have a clue on what they can make. The prospective franchisee thinks they are probably going to make $150,000 so why should a franchisor deflect their expectations? In today’s world a franchisee that was making $100,000 last year would be making $40,000 today. Nobody [most franchisors] would knowingly impart that information.”
However, that reluctance by franchisors to disclose a franchise’s average earnings before income tax or even how much they sell may be changing. Says Bond: “The trend is in the right direction. More franchisors are doing it. And the information is more meaningful than it was 10 years ago.”
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