NEW: Jacqui Walker
Monday, April 30, 2007/
I don’t mean to pry, but are you making money? Recent high prices paid for some franchises are not necessarily good news for the industry.
Is it worth it?
If you’re a franchisee, I have a tricky question to ask you. Are you profitable?
When I ask this question, I don’t mean are you breaking even or are you taking home a decent salary. I mean are you getting a good return on your investment?
If you bought your franchise in a big name chain in the past two years, there is a good chance that you are not. Some franchisees in the biggest brands secured some excellent prices for their franchises as they exited the system at the top of the franchise boom a year or so ago.
There was a Boost Juice franchise at Knox Shopping Centre in the eastern suburbs of Melbourne that reportedly changed hands for about $850,000, making a lot of money for the franchisee who set it up a year earlier for about $250,000.
In the west of Melbourne, the Highpoint shopping centre Boost Juice franchise was valued at $1 million by another buyer.
You could say the big prices are good news for franchisees. It means there is a lot of confidence in the brand and the system.
But the big prices have a sting in their tail. If you are the buyer and you paid a big price, that business has to keep performing very very well for you to make a good return on your investment.
As retail trading conditions have softened, this has become tough for many chains. And there is also seasonal variation you have to watch. For instance, people drink less juice in winter.
And worse, sometimes franchise chains are built on a fad. Franchising allows a fast way to take advantage of a fad, but it also means that when the fad is over, there will be more pain as the franchise contracts. I suspect that there are a few people feeling the pressure now.
It’s worth remembering that even in franchising, if you are not making a lot more than a salary, then you should have your money in the bank. It’s safer.
For more Eye in Franchising blogs, click here.
LinkedIn engagement pods: Silver bullet or desperate ploy? Sue Parker DARE Group founder
Own it: The 10 things you need to do to manage your personal brand Lisa Stephenson Who Am I Projects founder
How to call your team into action with a winning presentation Emma Bannister Presentation Studio founder
The link between diet and mental health — and how to eat your way to wellbeing Kate Save Be Fit Food co-founder
Australia is leading the legaltech revolution, but what does this mean for lawyers, firms and clients? Jodie Baker Xakia founder
Why a video news release needs to be part of your PR strategy Leisa Goddard Adoni Media managing director
Want to catch more customers? Here's how to create a super sales funnel Jovana Vujnic Bumper Leads founder
Great leadership is your biggest competitive advantage, so here are five ways to be memorable Martin Moore Your CEO Mentor founder