Joel Libava
As you look for some good franchises to own and operate, franchise profitability is usually top of mind. That said, it’s important to recognize that your franchising business won’t be an overnight success.
Just like any other business venture, making money in a franchise business takes time, dedication, and effort.
In this post, I’m going to share some of the things that go into the potential profitability of your franchise business. One of those things I’ll share?
How long it may take to become a money-making franchisee.
Two Questions About Franchise Profitability
Let’s talk about making money as a franchise owner.
Almost without exception, when you’re investigating franchises to buy, you’re #1 question is “How much money can I make?”
In most cases, that question is followed by “How long will it take to make a profit?”
And that’s the focus of this post.
FYI: If you want to learn how much profit you can make with a franchise, read this.
Transitioning Into Even MORE Responsibility
If you’ve always been an employee, transitioning to a business owner, which is great in so many ways, can be a shock to the your system. Why?
First off, your level of responsibility just grew by 8. That’s because as a franchisee (I’m using a retail or food franchise as an example), you’re responsible for:
- Rent
- Payroll
- Inventory
- Dozens of miscellaneous business expenses
- Federal, state, and local business taxes
- Marketing and advertising
- Sales
- Profit
There it is. Profit.
That’s the goal, right.
It’s also why you’re willing to take on all of the responsibilities a franchise owner has. No pain no gain, right?
Secondly, if you’re used to getting a salary, unless you build one into your business plan, you shouldn’t anticipate receiving one early on.
Franchise Profitability: When Does It Happen?
When you open your new franchise business, you’ll certainly have money coming in. But, it can’t go into your pocket right away.
Instead, it needs to go right back into your business to pay your operating expenses.
And don’t forget your monthly franchise business loan payment. You’ll need to pay that (on time).
“Great. Thanks for the reminder, Joel. Not”
Hang in there. It’s all good. Especially if you hit break-even quickly! That’s the point where your revenue pays your business expenses. So when will you make money?
Note: your business expenses and profit margins will vary, depending on which segment of franchising you choose.
The Truth
In my experience, you won’t make a profit from your franchise business for at least a year.
“A year?”
Actually, no. I was being nice. It may take a couple of years to make a profit.
“That sucks, Franchise King!”
I disagree.
It only sucks if:
A. You’re trying to replace your salary
B. You’re not in it (franchise ownership) for the long haul.
The bottom line?
Franchise ownership is not a quick win.
In other words, if you’re trying to make a quick buck, invest in something else.
But if you’re looking to own something that can be profitable over time, you have a real shot at success.
Just make sure you make a smart choice in a franchise.
P.S. Joe Stokar (who was my sales mentor), once told me that “Profit is not a dirty word.” Makes sense. Especially if you’re on the receiving end! Like when you’re the owner of a franchise.
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