Franchising is Great … for the Franchisor!

Nothing appears more appealing to many first-time entrepreneurs than buying a successful franchise.

A franchise provides a proven offering, a known brand and an operating manual that guarantees financial success. Right? Let’s see.

Ten of the 20 best franchises, according to Entrepreneur Magazine, are restaurant chains, so let’s look at this industry. According to a report on food franchising by Franchise Business Review, OVER HALF of food franchises earn LESS than $50,000/year in profit. Only a measly seven percent make more than $250,000/year.

The average annual profit for food franchises hovers a little over $80,000.

Now that you know the numbers, let’s be honest. Will an average annual profit of $80,000/year make you financially independent? How many DECADES would you need to successfully operate a franchise to achieve your financial “magic number?” These pedestrian profits remove some of the glamour of franchise ownership and we’ve only discussed the “upside.”

Now let’s look at what it’s going to cost you. Below are the top 10 restaurant franchises ranked by Entrepreneur Magazine (https://www.entrepreneur.com/franchise500/2019) and their initial required investments.

In order to buy and launch one of these franchises, you will need an initial investment between $700K and $2.2M.

I can’t think of too many savvy investors (or gamblers!) who would bet up to $2.2M in debt to have a 50% chance of making LESS than $50K/year in profit.

The real money in franchising is made by the franchisors! Don’t believe me? If owning a franchise was so profitable, then wouldn’t the parent companies want to own their own restaurants? However, that’s not the case.

Four out of these top 10 restaurant franchises own less than one percent of their own restaurants.

Yes…you get it. Buying their franchise is a great investment for YOU…but not THEM. As a franchisor, they can make a lot of money while you assume all the financial risk. I don’t hold that against them.

The founders of the franchise took all the risks, created all the operating procedures and experienced all the hard-learned lessons to launch a successful business. They deserve to profit from their previous work. But what’s fair? Should they take a cut from every product or service you have ever, or will ever, sell to a customer? Because, they do.

Allow me to present the franchising concept in a way that’s a little more straightforward.

What if I owned a beach house and approached you to buy it from me at a premium price because I’ll help you rent it out! And, because I’ll tell you what you need to do to convert it into a rental property, you must give me a significant portion of your rental income…forever.

You see the beach house’s potential as a rental property, but the “deal” seems ridiculously skewed towards me. I’m not only making risk-free up-front money from the home sale; I’m also making rental income FOR LIFE on “your” new home.

Most likely, you’d wonder why I don’t simply convert the home into a rental property, myself.

Then, you realize that if I did, then I’d be assuming all financial risk…and not you. Presented in an industry that most people are more familiar, the deal sounds horrible.

Let’s take this example one step further. Although the “deal” that I presented is awful, you’re sold on the idea of making money from a beachfront rental property. You’re a smart guy and realize that all you need is the “knowledge” to turn a beachfront house into a profitable rental property.

You do your research and find a successful real estate investor who focuses on rental properties. You pay him for his “consulting services,” and he helps you buy the best beachfront home and convert it into a profitable rental property. Here’s the best part of this arrangement; you don’t have to pay him a penny of your rental income!

I launched a Federal Government contracting company that made well over an order of magnitude more profit than the average restaurant franchise. After building it up for a few years, I sold it for 8 figures. Along this journey, I’ve owned multiple other successful government contracting companies, leading to successful acquisitions. Now, I walk aspiring entrepreneurs through a “franchisor-like” process to help them achieve entrepreneurial success.

At Government Contracting Academy, we offer “franchisor-like” support as you launch a Federal Government contracting company.

The Power of YOU: Launch Your Own Federal Government Contracting Company

It’s 100% YOUR company, YOUR decisions and YOUR profits. I encourage aspiring entrepreneurs to avoid the risk and costs of a franchise and consider the $100B to $200B per year in Federal Government contracts earmarked for new and small companies.

Save your millions of dollars in franchising fees, maintain total control of your company and keep all your profits.