One of the common beliefs in franchise ownership is that to make more money, you have to invest more money…. And that belief prevents people from even considering franchises because they think it’s too expensive.
To me, that’s really unfortunate because the correlation to high returns in franchising is not with the level of investment; instead, high returns are directly correlated with how well the owner executes the business model. The more effectively the franchisee performs the critical functions of the business, the more revenue they will generate, and the more profit they will earn.
Think about a mobile service business like residential cleaning, which you can start up for under $150,000. When my clients investigate this option and validate with existing franchisees, they hear that some franchisees are generating a few hundred thousand dollars in annual sales and sub-$100,000 profit, while others have built multi-million-dollar businesses and are earning several hundred thousand dollars in profit… with the exact same business model!
So what’s the difference?
Strong performers are regularly investing in marketing to attract new customers, and they’re closely monitoring the results to see which efforts work best, then adjust their marketing spend accordingly… while average franchisees spend the minimum required and pay far less attention to the effectiveness of their marketing spend. Strong performers promptly respond to customer enquiries, execute the franchisor’s sales process effectively, and win more clients… while average franchisees are more casual about responding.
Strong performers are careful about who they hire, and then they train their front line and management staff well, and maybe include pay incentives and career advancement to inspire strong performance… while average franchisees hire to just fill a position and pay the lowest wages possible, and thus deal with constant staff turnover and lower-quality work.
Strong performers utilize the franchisor’s quality control process to ensure customer satisfaction and respond to complaints quickly when those happen… while average franchisees are relaxed about quality and respond more slowly;
As strong performers add customers, part of the extra profit earned is invested in hiring more staff and more marketing, ensuring steady growth… while average franchisees pull as much profit as they can from the business instead of investing in strengthening their business.
There are a few more factors, but as you can see with this example, earning more profit is all about understanding the critical work it takes to drive the business, and then performing those functions well. It’s about leveraging the transferable skills you’ve built and mastered throughout your career, and finding a business where your best skills closely match the core drivers of that business.
Achieving high profits in franchise ownership only happens when you buy the right business! I’ve helped hundreds of people achieve success in franchise ownership, so let me help you. Book a call now.
Originally posted on LinkedIn
