How Much Do I Need to Make Before I Franchise My Business?

So you are daydreaming about summer, being on the beach and drinking large quantities of tequila. As you are daydreaming your thoughts go to your business and you remember at one point talking with a really neat company called The Franchise Maker about franchising your business. You continue daydreaming and imagine yourself in the future sitting on that same beach pleased about how your business has grown to hundreds of  franchise locations (in the United States and even internationally). Pipe dream or reality? You think to yourself that franchising could be a reality. And then you start to wonder, “Hmm…do I need to wait until I am more profitable to franchise my business?”

Simple Answer

Nope!

Here’s the explanation. When you franchise your business you cannot show your profitability to a potential franchise applicant anyway. It is illegal and could get you in trouble (this is one of our frequently asked questions, you can learn more here). The reason for this is because showing profitability is construed to be an inducement for somebody to buy into your franchise. Keep in mind, the reason why franchising is regulated (by the Federal Trade Commission) is to protect the consumer against being lied to, misled and fraud.

In the eyes of franchise regulators and examiners profitability is a variable that is really contingent upon how well or how poorly a person operates its business. It is also important to point out that there may be circumstances specific to a geographic area that play a role in profitability. Therefore due to these and many other reasons, you cannot make a claim to somebody how profitable they will be if they buy into your franchise (well you could… if you want to end up in a black and orange jumpsuit). As a result you cannot disclose the profits on your business. So it doesn’t really matter how much profit your business makes, so long as your business is making some kind of profit (read more in our article about “Is My Business Franchisable?”).

So now you say to yourself, “Great! This is good news! But aren’t people going to ask how much profit I make out of my business when looking to buy my franchise?” Yes it is possible people are going to ask you, but that doesn’t mean that you will be disclosing your financials. During our proprietary franchise development process we will train you on how to be a franchisor including how to address these types of questions (learn how we offer a franchise qualification process and training program). Ultimately it is up to the franchise applicant to put together a business plan and pencil out where they believe their profitability will be based on how they project revenues.

This may also lead you to ask, “How much money do I need to be making before I franchise my business?” Well there is really no right answer to this question, except for the fact that your business should be making money (see “Requirements to Franchise Your Business”). If your business is not making money (or is barely breaking even) or if you are thinking of franchising in order to make money to compensate for the money you are not making in your business; then you should not be thinking or even daydreaming about franchising! You are wasting your time. Your time is better spent thinking about how to improve your business, make more money and generate a profit so that one day you are in a position to franchise.

Pipe Dream or Reality?

Let’s go back to that pipe dream or reality. After reading this brief article you may be realizing that if your business is not making money and you are not generating a profit then franchising is a pipe dream. However if your business is unique and different, you have developed a way of doing things that nobody else has figured out, you have created a secret formula of sorts, your business is scalable and most importantly you are making money; then franchising could become your reality sooner than you think. Are you seeking straight answers about franchising your business? No problem, call us at 1-877-615-5177 or visit our website to contact us and we will give them to you.