Millionaires
Millionaires can be created from franchise ownership, but you must be very cautious about buying a franchise.
What is a franchise?
A franchise is a business that when you buy a license, you are buying into a supposed established business. You have the right to operate under their name and are given a a complete blueprint and a book of instructions you should follow to have a successful business like the parent company.You must follow the rules and regulations set down by the franchisor. It has all the headaches and most of the risks of any other business, except you do have help. The parent organization does want you to succeed and will give varying levels of help and training. They would love for you to become one of many millionaires, because they get their royalty right off the top.
Who can buy a franchise?
Anyone with the money can apply. First of all franchise ownership is not even available for many people, it will require a down payment, which is a franchise fee from most often in the $25,000-$100,000+ range. You will then need more additional funds to get into business, for inventory, a possible lease space, employees if you need them, and everything associated with opening a business. This will definitely be in the thousands and could be in the millions for hotels and other larger businesses. You must have the upfront franchise fee, but if you do not have the rest of the cash required, then you will need a loan. There are a number of franchises that you could start for less than $50,000 total, but you are less likely to have a business that can make you enough to save any substantial money. Keep in mind that besides borrowing enough to open your franchise, you need money to live on for a while, it will probably not make a profit right away.
Special Considerations
First you will have to pay an ongoing royalty fee that will usually include advertising; this will be generally 4-8% a month of your gross sales. This has nothing to do with your profit, you may be losing money but you will still owe a royalty fee on your gross sales monthly. You can’t tinker with or get creative with your franchise; you are expected to follow their plan as closely as possible. If your parent franchise goes bankrupt, you still own your store or business, but your brand reputation has been hurt and the buying power of the franchise is gone, so your costs may go up. Most license agreements are for 5-10 years. If you want to sell your business, you must have a right to transfer in your agreements. If you do then you usually must give the franchisor the first right of refusal and they must approve the buyer.
Be Cautious
Be Careful and do your research thoroughly before you buy a franchise. Ask how many franchises have been sold and their success. The most important question you can get an answer to, “How much can I make?”
Robert Bond, a franchise expert and the author of How much can I make?, talks about a medium sized franchise: “My view is that an average franchisee will probably make, say $60,000 a year by working probably 60, 70, or 80 hours a week at the outset. And that may or may not include a decent return on their investment.” He clarifies what he means by a franchisee’s earnings: “That’s their net income as a salary.”
And don’t forget the noncompeting clause. Just because you learn to run a restaurant or any other business as a franchisee, you will not be allowed to use that experience to start a similar business for some time after you leave your franchise.
Favor Your Own Business
Instead of a franchise, I feel a better choice for most is to take any tried and true business, do your research, start a business plan, and seek advice from one of the many free agencies that will help you. Get busy on your business plan today and start thinking like a business owner. I have shown that there are many types of ordinary businesses that make millionaires to include: clothing boutique, machine shop, plant nursery, gym owner, bread maker, craft beer, salesman, wristband maker, and many others. The many others include stories I have told you and stories of other types of businesses I have not yet told you or are in my book.
You really can make yourself a millionaire with your own business.
Many franchises have special programs for Veterans because they know they’re more likely to succeed. A Reservist family can do very well with a franchise, building it while the military paychecks are still coming in. Many Military wives have to have jobs outside the home. Being co-owners with all of the structure and support a franchise has can be much better than being employed by someone else. But, definitely check out their success rate. Ask fellow Vets in your LinkedIn groups how it has worked for them.
Joy, thanks for your comment, you are correct. VetFran.com has a toolkit of information and a list of all the franchises that offer discounts for veterans. Your comment seems to be very positive toward a franchise. While they can be great for the right person, I take a more neutral position, because they can be potentially horrible for the wrong person, or the wrong franchise, or the wrong situation. If someone decides to pursue a franchise, please do all your research. Read a book or two on franchises before you start your quest too, a good book to start with is Become a Franchise Owner by Joel Labava.
Special note for the Veterans, if you are still in the military or recently out, be extra careful. I was there, and we tend to trust people too much.