How does it work?
Franchising has been around for a while – most likely because it’s a system that’s been successful. It works when an individual or group (the franchisee) establishes a relationship with a business (the franchisor) to help grow that business and distribute its product. The franchisee pays a franchise fee to use the franchisor’s business model and leverage its existing brand name, while agreeing to follow the operational terms of a contract, also known as a franchise agreement. With the support of an existing business model and a recognized brand name, the franchisee typically gets a quicker return on his or her investment.
Currently, there are over 3,000 franchise systems in the United States, representing a range of industries. These franchise systems represent 3.2% of all businesses and approximately 35% of all retail and service revenue in the country.
How much do Franchisees make?
We get that question a lot, but it’s difficult to answer since there are so many variables affecting a financial bottom line. The good news is, your earning potential can be as big as you want to make it. Aside from a stellar work ethic, here are a few factors that can determine your financial success.
- The kind of franchise you choose is probably one of the biggest variables that impacts earnings. Make sure you’re looking at a business that offers services and products that are in demand. You won't make money if the business is in a sector that's oversaturated or about to implode.
- The location of a franchise also determines your earnings. It’s important to choose a franchise located in a community that will want what your business is offering. Remember, traffic drives sales and sales keep a franchise healthy and growing.
- Your ability to build strong customer loyalty contributes to the success of a franchise. Treat your customers like family – and they’ll keep coming back.