how much do franchisees actually make?

A Real-Life Look Inside the Numbers

If you’re considering buying a franchise, the big question on your mind is likely:

“How much money can I realistically make?”

You might find yourself comparing different business models right now, such as:

• Buying an existing business
• Starting your own business
• Vending machines
• Franchising
• Real estate

All the above have their own gurus claiming that you can make a lot of money in no time.

We’ve all seen the get-rich-quick dropshipping ads on YouTube.

Sadly, I’ve seen people make outrageous income claims in the franchising space as well.

I’m writing this to give you a realistic view of how much money franchisees can make.

While actual profits vary based on the:

• Location
• Operator
• Franchise model

…it’s helpful to take a look at some realistic numbers to set expectations.

Let’s walk through the real-life example of a friend of mine.

I’ll call him Bruce.

The Financial Journey of a Real Franchisee

18 months ago, Bruce quit his job and acquired an existing franchise.

Based on the seller’s financials, Bruce expected he could make almost $200,000 per year in profit.

But after buying the business, he found out the previous owner hadn’t changed things in a while:

• They paid a poor recruiting agency lots of money
• Their prices were below market average
• Some of their staff underperformed

To most people, these things sound like problems.

But to Bruce, they were opportunities.

If the franchise was profiting $200,000 despite these issues…

…imagine how much he’d make after resolving them.

So Bruce went to work to do a series of improvements.

He:

• Cut unnecessary expenses that the previous owner had let balloon
• Raised prices to match market rates
• Built new referral partnerships

These small improvements helped create a flywheel:

1. Higher prices allowed Bruce to replace C-players with A-players
2. With a better team, his customer satisfaction rose further, so he made even more
3. Recently, he hired a full-time business developer to drive more leads

Almost a year later after buying the business, Bruce has grown the business’ profits by 50% and is now on track to hit $300,000 in annual profit.

So what were the key levers Bruce pulled to massively increase profits in such a short period of time?

The Five Variables that Impact Franchise Profits

There are a few critical variables that can make your franchise to over- or under-perform:

1. Lead generation

One of the beauties of franchising is that you’re not reinventing the wheel. The franchisor has built systems to help you generate leads.

For most businesses, it’s a three-prong approach:

1) Digital marketing – the franchisor quarterbacks this process. They create content and strategically market you on Facebook, Google, Instagram, & more.

2) Self-generated leads – your team works to generate leads through:

• Door knocking
• Building relationships
• Joining local networking groups
• Asking every customer for direct referrals

3) Build referrals with people who meet your ideal customer every day. Ask yourself: who meets my ideal customer every day? Tip: if you’re out of ideas, use ChatGPT to brainstorm.

2. Talent

Hiring, training and retaining the right people is crucial in any business. But especially in people-centric service franchises. Your people are your service.

Bruce was willing to pay above market rates to build a superior team, which drove better client results and retention.

3. Local market pricing

Understanding what pricing your local market tolerates is key to profitability.

Bruce optimized his pricing which helped expand his margins, hire better people, etc.

Find out what your competitors charge. If you charge less, raise prices. Your prices are too low if nobody complains about your pricing!

4. Expenses and cost controls

Keeping a tight lid on costs and unnecessary expenses goes straight to the bottom line.

Ruthlessly cut waste.

5. Scaling and expansion

The highest-earning franchisees think beyond a single unit.

Once they’ve made one unit profitable, they use the cash flow to fund new ones.

That’s the advantage of franchising –

You scale by copy-pasting profitable units.

The Most Important Variable of All

When you start a franchise, you get access to:

• An operational playbook
• Franchise support
• Growth tools

But at the end of the day, none of these matters as much as your own skill and execution.

Bruce’s story shows that you as the franchisee own your outcomes –

Without the risk, investments, and hard work, the profits wouldn’t be anywhere as high.

The franchise gives you the vehicle. But you’re in the driver’s seat when it comes to building it towards your income and lifestyle goals.

So, how much money do franchisees actually make?

As you probably knew even before reading this, it depends.

But I still wrote all this to tell you that, beyond anything else, it depends on you.

Cheers,

Brian