How much money can I make as a franchisee?
Is buying a franchise a sound financial investment? You’ve done your research. You’ve done your due diligence. Do you still find yourself pondering one of the most pressing questions: “will I make money as a franchisee?”
In considering franchise opportunities, franchisees invariably want to know – “how much money will I make?” This was certainly the case for Ryan Kelly, the co-owner of WSI Smart Marketing, before he started his franchising journey. He explains how his investment in the WSI franchise put him on the path to financial success on the Franchise Canada Chats podcast.
But the truth is no franchise – no matter how established – can promise you bottomless riches.
However, there are some steps you can take to give you an idea of what your earning potential as a franchisee within a particular system can look like:
What are earnings projections?
This is information you receive as a prospective franchisee about potential income, sales or profits, which helps you predict your earnings.
Do Franchisors have to provide an earnings claim?
The short answer is no. However, in British Columbia, Alberta, Manitoba, Ontario, New Brunswick, and P.E.I., franchisors are obligated by law to publish earning projections within the Franchise Disclosure Documents (FDD).
In other provinces, a franchisor may choose to provide a franchisee with a FDD voluntarily. In these provinces, earning claims must be historical, written or formal and be based on pertinent financial and statistical data available for inspection by the franchisee.
What should you be aware of?
Many franchisees make the mistake of asking the franchisor outright how much money they can make. Whether the franchisor communicates potential earnings verbally or scribbles down a number on a piece of paper, you shouldn’t rely on this. This isn’t legal information.
The only legal form of earning projections is the FDD. And even this isn’t any guarantee of financial success. Remember, financial projections are simply a historical review of costs and financial data based on how the franchise’s other units throughout the country are doing.
Bottom line: Will you make big bucks as a small business owner? There is no answer. But if you do your due diligence, speak to a lawyer and avoid the red flags, for the most part, you can come up with a solid idea of how much you can expect to earn with any franchise opportunity.