Historical earnings can be great predictors of the future.
“Ok, sounds great, but how much money can I make?” Without fail, this is one of the first questions people ask me when we discuss franchise opportunities. And it’s a perfectly reasonable question.
They want to know if the money, time, and effort they invest in an opportunity will be worthwhile and meet their personal and financial goals. Fortunately, there are some methodologies to help answer the “how much money can I make” question.
Every franchise offering in the US has a Franchise Disclosure Document or FDD. And there are two sections in the FDD that are particularly helpful when evaluating earning potential and creating a financial proforma.
- Item 7 – Estimated Initial Investment gives a high and low range of the expected investment.
- Item 19 – Financial Performance Representation. A typical Item 19 contains revenue information, sometimes labor, cost-of-goods expenses, or even a full earnings statement.
Another key tool at the disposal of a potential franchise owner is Validation. Validation consists of discussions with existing franchise owners, including validating the investment and financial performance they are experiencing. By piecing together the information in the FDD and validating with the current franchisees of that concept, the prospective franchise owner can then create a financial proforma that helps answer the “how much money can I make” question. Working with a franchise consultant to help determine if investing in a franchise is right for you is all about getting the information you need to make an educated decision and not a blind guess or a blind leap.
If you are curious about whether franchise ownership is right for you or which opportunities can help you meet your personal and financial goals, let’s schedule a brief intro call by clicking my calendar LINK and unlock the path to financial prosperity and freedom of time.