Steven Wade is a family law advisor (McKenzie Friend) with nearly 20 years of experience helping people represent themselves in court. Having been through the system personally and supported thousands of others since, he knows what it’s like to face the stress, confusion, and pressure of doing it alone. This blog shares practical insights that empower you to take control of your case — without the legal jargon or the hefty solicitor’s bill.
Is owning a franchise profitable?
Family Law Assistance
The only alternative to a solicitor.
Is owning a franchise profitable?
- Introduction
- Guarantees in business
- Why would I buy a franchise when I can start a business for nothing?
- What do I get for my money when I buy a franchise?
- What does profit even mean?
- Is it all about cold hard cash?
- What happens if my business isn’t profitable?
- Conclusion
Introduction
Whatever your motivation for owning a business is, a simple fact is that if you are constantly in the red you’ll run out of money eventually. Your business will close and you’ll need to do something else.
So asking if the venture you’re looking at is going to make money is an extremely good question.
A franchise has it’s upsides and it’s downsides. There are good reasons to buy one (and some not to too).
This blog post will answer the questions `Is owning a franchise profitable?’
Guarantees in business
This is a trick heading of course.
There is no such guarantee. No business is immune to failure, downturns, lack of clients and a whole host of other problems that only make life difficult. Even the largest, oldest and most well established business can fail.
So if you’re looking for a guarantee…you’re not going to find one in buying a franchise (or any other business for that matter).
You may think that becoming an employee for an existing business is a better option.
Because you get a regular salary, regular work and a lot of stability that you wouldn’t do running your own business, right? It’s an understandable mindset to get into. You turn up on Monday morning, 5 days a week and collect your pay each month. Chances are you’re not going to be worrying about if your company is getting enough work – because unless you’re at the top of the corporate latter, you work in sales, etc. you’re probably not going to know other than rumours that your management team will dismiss as baseless.
Right until the point your team is called into a short notice meeting by HR to detail company restructuring and/or redundancies.
Your line manager is unlikely to motivate you by saying `Your job is safe here unless the numbers don’t stack up and we have to lay you off’.
The point here is simple: Even in seemingly stable roles in large businesses there is no guarantee you’re going to be working there next month.
Why would I buy a franchise when I can start a business for nothing?
It’s true! You can start a business for nothing.
Family Law Assistance started with nothing. Well…we had a couple of cobbled-together computers, an old printer and typed up in our invoices in Word and recording their details in an Excel spreadsheet. We built our own website, used our personal mobile phones to field customer enquiries and worked from a homemade desk on the landing of the barn conversion we were living in, in rural Wales. It may sound romantic and while we get nostalgic about it from time to time it was a hand-to-mouth existence that I wouldn’t want to repeat.
Many business starts with no (or low levels of) capital – the equipment, premises and other stuff just to do the day-to-day work. Businesses like Apple, Google, Meta and IBM started like that. The drive and passion of people who spent countless years working away and learning incremently what worked and what didn’t. No one noticed their existence until they started making waves and they had countless, forgotten competitors who fell by the wayside over the years.
So a business that merely exists for an extended period (we’ve been going 16 years now!) represents something that works and is sustainable.
Buying a franchise is like buying the `cheat sheet’ for a particular business model.
It’s something that has been tested, refined and has stood the test of time. It…works.
And while there is no guarantee that if you buy the model you’ll have the same trajectory you need to compare that to the possibility that the business you will start will be one of the ones that is around in the future.
But the figures speak for themselves….compare these statistic:
- The five-year survival rate for UK businesses born in 2016 is 38.4%.
- By comparison….80% of franchises are still running after 5 years.
So – while there is no guarantee that any business or franchise you own will be around in 5 years the chances is doubled if you go for a franchise which is kind of mind blowing!
What do I get for my money when I buy a franchise?
Aside from it being twice as likely you’ll still have a business in 5 years time (which to be fair, isn’t to be sniffed at…)?
It depends. There are a huge number of franchise opportunities out there in all shapes, sizes, models and costs. They range from low cost options that include travel, dog walking and tutoring franchises for a few thousands all the way through to hotel franchises costing hundreds of millions.
And on top of the variation in initial investment, the nature of the business and how it works can vary greatly.
A dog walking franchise involves minimal equipment and upfront expense compared to owning a chain of hotels. The model can vary greatly too. Do you need to own the equipment/property you’re using? Can you lease it? Are you tied into certain suppliers? Does the franchisor provide equipment/services/suppliers as part of the contract.
You’re only going to find this out by doing your research by speaking to the franchisor, reading the literature and weighing up the pros and cons of it. You may decide that it’s a price too high or an opportunity too good to pass up depending on your mindset.
What does profit even mean?
It can sound like a silly question but there’s more to it when you think about it. Your accountant and HMRC will give you a simple, straightfoward definition. Nice, eh? That’ll be because their only interested in the numbers and nothing else.
A commonly accepted definition of profit is this:
Profit is the money you have left after paying for business expenses.
Keep the right records and you’ll have a clear, simple number that gives you an exact figure on that. If the only factor you care about to the exclusion of all others this is the one this is the only thing that counts. If this is the case you don’t care about:
- Time off.
- How much work you need to put in to get the profit.
- How you get the profit.
- Whether the business interests you or not.
- How many people are working on the business.
Most people aren’t built like this.
And besides – if you’re not interested in what you’re doing, it’s going to show. Seeing as most franchise agreements are usually something like 5 years you should probably do something that you actually like doing. Because if you’re actually doing something you look forward to doing…you’re going to be in a good frame of mind and more likely to do the work needed to run a successful business (as opposed to turning up, doing the bare minuimum and wondering why things aren’t going as well as you would have liked).
Is it all about cold hard cash?
This is possibly a silly question. Possibly not.
But better questions may be:
- How much money do you want left after you have paid for business expenses?
- How much work do you want to do for how much money?
- Do you like the business and model enough to do what is needed to earn a decent profit?
It’s all a trade off. Hopefully you’re looking for a franchise you enjoy doing because if you do so you’re much more likely to thrive than if you are going through the motions, doing the bare minimum and hating what you’re doing (it’ll show too).
How much money do you need to make to live the lifestyle you’re looking for? How much are you willing to do to achieve it?
A good franchise model will enable you to maximise your income for a minimum of work on your part. That can be achieved by automation, outsourcing, by a good business model, how you work, when you work, etc.
What happens if my franchise isn’t profitable?
Businesses are sometimes unprofitable as I’ve mentioned above – it happens. Franchises can also be unprofitable too because there are no guarantees (although statistically speaking it has twice the 5-year survival rate).
But If you’ve started your own business and you’re losing money? You’re on your own. You’re going to need to come up with a plan and make decisions to either remedy the situation or decide enough is enough. There’s no backup, no support, no one else to fix it.
That’s a stark contrast with owning a franchise however – there are a large number of avenues open to you.
These avenues include speaking to your franchisor for support. They have probably ran a business like yours for a long time and can give you practical advice about what works and what doesn’t. They’ll provide ongoing training to improve the situation. You’ll be able to speak to other franchisees to compare notes and share experiences. You may be able to come up with something really out the box to fix things at short notice too.
They may even be in a position to provide you with clients/work.
The franchisor has a vested interest in you succeeding too – because the model benefits both you and the franchisor:
They want you as a shining example of a franchisee, an advertisement for others to join the franchise. As your profits rise they’ll increase the royalties you pay them too.
It really is a win-win situation when it works.
Conclusion
If you want just take home from this blog, it’s at the head of this piece.
There are no guarantees you’ll make a profit as a franchisee. (There are also no guarantees you’ll make a profit if you start your own business from scratch and no guarantees you’ll be working in that secure full time job this time next month).
If you hate any kind of risk whatsoever you definitely aren’t cut out for life as a franchisee or a business owner. You may decide there isn’t any risk as a full time employee and believe your manager’s assurance you have a guaranteed job for life. If that works for you – it’s a win.
But for the right person? You’ve got the freedom of owning your own business, the potential to exceed the money you’d earn, a proven plan that works and a support network that is with you every speak of the way when you need it.
This post is for informational purposes only and does not constitute legal advice.
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