As a franchise consultant, a question I hear is “What is the payback for the investment in franchising your business?” For most National Franchise Associates clients, earning back your investment in franchising your business can be surprisingly quick. Most NFA clients invest between $40,000 and $50,000 initially in developing and launching their franchise programs.
Let’s use the example of the relatively low initial franchise fee of $25,000. When franchising your business, you can make back your investment with the initial franchise fees from no more than your first two franchise sales. Looking at it a different way, when franchising your business, you can recoup your initial investment in franchising with the initial franchise fee and a portion of the year one service fees from your first franchise sale.
However, franchising your business simply to cover your initial investment in franchising isn’t really the point is it? You are franchising your business because you want to make money and grow your concept. For a well-structured franchise program, the return on investment can be enormous.
Let’s look at the royalty or service fee. For this example, your average franchise has gross sales of $1,000,000 per year. Your service fee is six percent of weekly gross sales. Your weekly service fee for each franchise averages about $1154, or $60,000 per year. For every ten franchises you sell when franchising your business, you make $600,000 per year in royalty income.
In our example, if you sell 50 franchises, you will generate $3,000,000 annually in royalty income when franchising your business. Their operating costs vary, but NFA clients’ profit on the annual royalty income typically is at least 75%.
Using our example, when franchising your business, your profit on service fees alone can be at least $45,000 per location per year. Keep in mind, this does not count other potential income derived from the sales of products or services to your Franchisees, initial franchise fees or income from real estate programs.
Some NFA clients have been happy selling ten to twenty franchises and living nicely from the royalty income with little stress involved. Others have a goal of selling hundreds or even thousands of franchise locations.
The choice is yours when franchising your business.
Thinking About Franchising?
NFA Franchise Consultants have the experience to help businesses franchise. Just watch and listen to some of our client case studies and video testimonials. We can HELP YOU and it doesn’t cost anything to call and talk to us!
So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form. We look forward to helping you take your business to the next level and beyond.