Discovering a franchise ROI potential

In today's video, I'm going to talk about a question I get quite often from my client when we are selecting a franchise to invest, which it is: "how much money can I make from this business?"

First of all, it's important to understand that franchises in the US legally cannot make any earnings claim unless the information is disclosed in item 19 of the Franchise Disclosure Document. This is the only item, financial performance representation, that franchisor can include or not at his own discretion. In a different video I give more information about this document, also known as FDD.

It's essential to keep in mind that if a brand does not have an item 19, it doesn't mean that the franchise might not have great financial potential. In some cases the brand is new and don't' have a large sample to compile relevant data, sometimes the franchisor might not receive accurate information from all franchisees, especially regarding costs, perhaps the franchise has a different concept for the full-time and part-time franchisee, which could distort the overall numbers.

It could be for many reasons, but in the end, some brands provide this kind of information, and others don't. The type of data also varies, but in many cases, the franchisor provides information about revenue: averages, median, high and low performance, and more.

Regardless of the franchise has an item 19 and what's on it, it's important to understand that with every franchise, the candidate will be able to have a good sense of the financial potential as go through the discovery process. After all, this is one of the essential information to be able to decide on any investment.

Usually, when a candidate is pre-approved by the franchisor, he receives the FDD, and if there's an item 19 on it, the candidate will start to have an idea about what to expect financially.

Even if the brand doesn't provide data on item 19, as the candidate continues moving forward in the process, he will have the opportunity to talk with the brand's franchisees for validation. Because there are no legal restrictions for them to give any financial information, this is a critical moment to get a clear picture of how much money is possible to make, at what period, and what's necessary to achieve a specific number.

So to conclude, every candidate will have the opportunity to know how much money a good franchisee can make investing in a specific concept, as he moves forward in the Discovery Process, regardless of the brand provides or not an item 19.

The last aspect I would like to point out is that in order to achieve or surpass some number in a specific franchise, the candidate must possess what it takes to succeed in that particular system, so it's imperative to look for franchises that match the candidate's characteristics.