Beware of Your Potential Profit Perception Prior to Purchasing a Franchised Business

Most small businesses go out of business in the first years, and although franchisees usually have a slightly better percentage of success, that doesn't mean it cannot happen to you in the event you buy a franchise, you very well could lose all of your money, though out of business, and perhaps even file personal bankruptcy. Prior to retirement, I ran a franchising company, and for the first years I have met every franchise buyer personally, and did the franchise sales. It was important for me to meet each new franchisee, and I didn't trust someone else to do the sales.

There are lots of franchisors that do not give "earnings claims" when selling franchises. In other words, of the questions that most franchisees ask is; "how much money am I able to make if I buy this franchise?" And lots of franchisors basically won't say - all they will say is that; in the event you buy this franchise you are putting your capital and money in danger. Yes, well that goes without saying because anytime you start a new business, it is a dicy venture.

Often franchise buyers would come to me thinking they were going to make millions of dollars, and I had to set the record straight. Some franchisors and lots of salespeople which are working on commission, don't say anything, and they permit the franchise buyer to think that they are going to make boatloads of money than telling them that their estimates of profit potential are very unreasonable. The reason the salespeople don't require to say anything is perhaps they figure that will ruin the sale.

I can keep in mind laid-off corporate executives telling me that they were going to make a ton of money, often giving me a figure which was equal or higher than what they were making corporate America. That was impossible from what I knew about my own business, and the business model that I created in the first couple years of business while they were still building their reputation in that local region or territory. It is very simple for someone to get the wrong perception of the amount of profit they might make in the event that they buy a franchised outlet.

This can happen in numerous ways, perhaps they meet a franchisee, who looks like they are making money hand over fist, but perhaps they are not turning a profit at all. Perhaps the franchise buyer happened to cease in on of their busiest days of the week, and in the work of there'd busiest time period. Do you see that point? I hope you do, and I hope you will think about all this, and think on it.

Posted in: Franchising