NFA Franchise Consultants

Franchise Development

Franchise Development: Making Sure the Franchisee Can Make Enough Money

Reflections of a Franchise Consultant

Stephen S. Raines
President, National Franchise Associates
Atlanta-based Franchise Consultants

Franchise DevelopmentIn my over three decades of experience as a franchise consultant and working in franchise development, I am often asked “What makes one company succeed in franchise development while another doesn’t?”

Rarely is there a single reason for success or failure in franchise development.  Here, I will examine one of the many factors that can help Franchisors create a win-win situation in the franchise development process.

Many business owners considering taking the franchise development route to grow their businesses have asked me, “How much money does the Franchisee need to make?”  The simple truth is there is no one right answer to this question.  However, it is critical in your franchise development to determine the answer from your prospective Franchisees’ viewpoint.

When working on franchise development, recognize there are a broad variety of opportunities available.  Franchises come in a vast range of industries, can require very different skill sets, serve diverse customer bases, involve varying time commitments, entail different levels of initial and on-going investments, create different levels of income and afford their owners unique emotional rewards.

Each of these factors must be examined when you are in the franchise development stage.  With one franchise, the average Franchisee may make $10,000 per year and another, the average Franchisee may make $500,000 per year, and both sets of Franchisees are happy.  No one size fits all when it comes to the franchise development process.

When working on franchise development, you must determine whether the likely income the Franchisee will earn will make it an attractive offering.  During the franchise development process, consider:

  • The initial investment;
  • The on-going investment;
  • The gross revenues likely to be generated;
  • The anticipated profits;
  • The industry in which the franchise is a part;
  • The skills and experience that the Franchisee will be required to possess;
  • The average income a person possessing the required skills and experience is accustomed to earning;
  • Whether you are targeting a person seeking supplemental income rather than the main household income;
  • The uniqueness of the business;
  • The typical income of the Franchisees of any directly competing Franchisors;
  • The time commitment required of the Franchisee;
  • Whether you plan to allow Franchisees to own multiple locations; and
  • Other benefits of owning your franchise.

This last point cannot be overlooked in the franchise development process.  There are businesses such as travel agencies or pet services that do not produce a high level of income, but give the owner a tremendous amount of emotional satisfaction, such as free or discount travel or the opportunity to spend their time in a field they love.  When you are planning your franchise development, be aware of the emotional benefits of your franchise.