This article are provided for information purposes only, and are not intended as legal advice.


How many franchises do you need to make a good income?

September 18th, 2009

Some franchises are very profitable but many franchises do not make a huge profit.  As a result, many franchisees bought themselves a job which pays a salary and there is a small amount of profit generated annually.  Many investors believe that a typical franchise will generate $50,000 of profits for each location.  In order to make a good living, they need to own many locations.  If an investor owns 10 locations, in theory they could be earning $500,000 per annum.  There are synergies of owning many locations. 

 

I am aware of an investor owning 10+ donut shops.  Instead of having an oven and having 10 bakers in 10 locations, he has a central bakery which has one baker in one manufacturing facility.  He delivers products to each franchise location several times a day.  The capital requirements of this owner is far less than if he had to install baking equipment in ten locations.

 

Many franchisors like to sell franchises to existing franchisees.  They know that you understand the system and if you do a good job, they would rather have someone that they know as a franchisee rather than having to try a new investor.  I have been told by franchisors that 10% of all franchisees of each firm are problem franchises and consume a lot of time of the franchisor monitoring these franchises.  If the franchisor can avoid getting a new problem franchisee, they will continue to sell as many franchises as they are capable of operating and financial affording.


Filed under: Franchises — Gary Landa @ 1:19 pm


2 Comments »


  1. How do I find a conventionall lender who will fund a cleint whos is interested in buynig l arge scale restaurant in Canada

    Comment by Sheny — September 23, 2009 @ 1:35 pm

  2. are thir any convntional lenders inCanada who will consider finnaicng the purcahse an established large sacle restaurant

    Comment by Sheny — September 23, 2009 @ 1:36 pm


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