How Much Can You Make as a Franchisee? Consider This.

In this article originally published by Entrepreneur, iFranchise Group CEO Mark Siebert addresses the franchise buyer audience and provides important information to help determine if owning a given franchise location will give franchise owners the financial return they seek.

The article starts with an overview of the Financial Performance Representation (FPR) found in the Franchise Disclosure Document (FDD), which is offered by franchisors to potential franchisees during the sales process. The majority of, but not all, franchisors include some kind of information in their Item 19 / FPR. Siebert provides a list of reasons why some franchisors might not provide this type of information, as well as advice on reviewing FPRs, and the importance of not relying solely on FPRs.

Regardless of whether the franchisor supplies an FPR, franchise buyers should complete the all-important task of developing their own estimates of what they can expect to earn as franchisees. Siebert provides specific recommendations on how to accomplish this step, including:

• Speaking with existing franchisees of the brand, if possible
• Evaluating the franchisor’s own income statement
• Comparing Item 19 information from competing franchise brands
• Using performance requirements as a measure
• First-hand observation of operations
• Third-party research resources
• Simply asking the franchisor or other franchisor contacts directly!
  

The bottom line: Siebert cautions to not buy a franchise until conducting the appropriate due diligence. In the end, though, he notes that “there is really no way to know how much you’ll earn — until you’re out there earning.”