How Much Money Can You Make as a Franchisee? Atlanta GA

Early in U.S. franchising history there were many instances of abuse, particularly where unjustified or misleading earnings claims were used to sell franchises. In 1979 Congress passed legislation authorizing the F.T.C. to regulate the franchise industry to try to stop any such bad practices. A number of states also passed similar legislation. The current F.T.C. and state rules do not forbid a franchise company from supplying information about the earnings that can be achieved in their business. They do, however, regulate how this information can be given to a prospective franchisee.

A franchise that wants to provide earnings claims must put it in writing in their UFOC disclosure document. Also, it is essential for the franchisor to make sure that the data provided is accurate and not misleading and they need to clearly label any assumptions or qualifications on the data provided.

Assuming they meet the legal requirements, a franchisor is free to provide whatever earnings information they want to a perspective franchisee in terms of sales, expenses, cash flow and income.

It sounds relatively simple but there are still many franchisors that don’t provide earnings claims. There are two likely reasons: First, producing an earnings claim does involve effort and expense for the franchisor. Second, the results may not be attractive enough to assist in the recruiting of new franchisees.

If a franchise does not provide an earnings claim in their UFOC, the best source of information to find out how much money you might make is the existing franchisees of the system. Call them and ask. Item 20 of the UFOC provides a list of current and former franchisees along with their contact information. You will be talking to many franchisees anyway as part of your due diligence so make sure you also cover the subject of the averages and ranges for earnings in the system. By gathering actual performance statistics, you will have a realistic starting point in determining how much you can expect to make in a similar business.