Franchise Revenue Was Not The Issue, This Was...

Posted by Jim Otto

Research. Research. Research. Doing research before you invest is so important. So know how much it is going to cost to pay your employees and hold retail in your store. Make sure you are trained in both so you can be as successful as possible.


Franchise candidates spend a great deal of time studying revenues of various franchises. Yes, average revenue is an important number when researching franchises, but that only tells one side of the story. 
Expenses are the cost incurred in the operation of a business and have a HUGE impact on the profitability  of a franchise.  The fact that you have a royalty payment and payments into the marketing fund makes studying the expenses even more important! Make sure you understand the following two expenses, especially if you are looking at a service or retail business.
- Labor Cost: This is what you pay your employees and it should be calculated as a percentage of your revenue. I think of labor cost kind of like that RPM meter in your car. If the franchisor can't explain and train you to control this cost when you are redlining, then you will probably crash and burn. Make sure you understand what the industry average is and ask existing  franchisees what THEIR labor cost percentage is.
- Cost of Goods Sold: Selling retail and products can be a big boost to your bottom line, or a big drag. Your franchisor being able to train you on terms like retail turns, stock to sale ratio and spoilage are important components on your cost of good sold.
While many franchises provide cost information, not all do. Lowering expenses can give you a big boost in profitability - and a big boost to your confidence that you picked the right franchise! 

Your Future is a Dream Come True!

francomparesmfawardWINNERtransparent-1Shear Madness Franchising franchises our award-winning Shear Madness Haircuts for Kids salons. We have worked with franchise stores in providing franchisee support (in order to encourage continual growth and business success), and have sometimes seen the unexpected happen! When it does, we help by identifying and helping with challenges that might arise for franchisees. Additionally, we work to present options that can help prevent these events as well. As many franchise owners may not have opened a business before, having someone who can advise them is a significant advantage of franchise ownership!

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