One of the most reliable ways of measuring the rate of appreciation of your franchise is through checking its overall growth. This is mostly portrayed on a chart that illustrates a franchise’s growth over a given period of time, often ten years. A particular determiner in unit growth is the number of units (branches) that have been added or closed down during the time frame.
The best chart to aid in estimation of unit growth should indicate the number of additional units opened and/or closed in a particular year, the location of the various units (within the country or overseas), and the number of the units that are company owned. An average unit growth over a span of ten years is a good sign of a profit-making franchise.
Personal growth objectives are a major determiner of how fast your business becomes a profit-making franchise. The owner can invest the money made from the business, take it as his profit, or pay his debts. The former is focused on achieving long term goals and it is the best route for a profitable franchise opportunity, which you can view some opportunities at https://nationalfranchiseresales.com/franchise-opportunities/.
Degree of Prescription
There is a tendency of profitable franchise networks being highly prescriptive. In general, it is safe to say that the higher the level of prescription in a franchise, the higher the profit. A highly prescriptive franchise is one that clearly outlines how your business is to be run, the training procedures and their costs, on-going support being offered to the franchise and the marketing procedures by the franchiser etc. It is also expected of profitable franchises to define roles and responsibilities such as the minimum performance criteria, conference attendance, brand compliance and financial reporting. Once your franchise achieves a high degree of prescription, it is bound to be a profitable franchise.
Verification from other franchisees
Under the terms of the Disclosure Document, the franchiser is required to provide contact details of all the current and past franchisees. By getting in touch with as many franchisees as possible and asking them all the noted financial questions, you could be able to better estimate how long it will take for your franchise to become profitable and if at all yours is a worthy franchise opportunity.
Location of the Business
The profitability time frame of you franchise is often hugely impacted by whether your business is retail or non-retail. It usually takes a minimum of 6 months to open a franchise business that requires a retail store front. It could also take as long as twelve months from signing to getting the business running. As compared to the latter, non-store front businesses will take 4 to 8 weeks to open. This means that the owner has more time to make the franchise profitable.
Debt vs. Equity
Debt financing, usually attractive to most franchisers, is detrimental to the rate of your franchise opportunity becoming profitable. It is important for a franchiser to realize that in order to reduce the cost of doing business, they should use equity since it allows for a faster rate of breaking even.