Potential franchise owners research different franchisors to learn how much money they can make before they purchase a franchise. When they approach a franchisor to learn more about it, they may find that this topic is difficult for franchisors to respond to. For a number of reasons, they cannot tell a possible future franchise owner how much they can make.
According to The Franchise Investigator website, the median annual income of a franchise owner was between $75,000 and $125,000 in 2010. The website claims that 30 percent of franchise owners earn more than $150,000 per year.
It is difficult to get a straight answer from franchisors about the potential for making money from one of their franchises. This is because some of them do not publish information that can help you determine the income range to expect. In 1979, the United States passed legislation giving authority to regulate the franchise industry to the Federal Trade Commission. The FTC has since stated that only certain kinds of information about sales and other income can be presented to potential franchise owners. The legislation was passed to prevent the misleading advertising franchisors had been promoting in the past.
Franchise Disclosure Statement
In Item 19 of the Franchise Disclosure Statement, franchisors can publish certain kinds of information about sales and income to potential franchise owners. Some choose to do so, but many do not. You can determine the possible range of income you can earn from owning a franchise by doing some calculations based on the information provided in Item 19 of the FDD, if a company publishes it. If a company does not provide information in Item 19 of its FDD, contact the franchises' past owners to find out about their personal experiences owning the franchise. The company's FDD publishes contact information for past franchisees. Your personal business management skills and the local and national economy will also factor in to how well your company does.
When you calculate how much money you can make, include the franchise fee as an initial startup expense you will have to pay. Royalties to the franchisor, equipment and supplies, rent, insurance, building improvements, advertising and other costs must also be factored in when you calculate how much income you can make. Training expenses to learn how to operate the franchise should also be figured in to your startup costs.