Will my franchised restaurant make money?

Will my franchised restaurant make money?
By Chad Finkelstein
November 20, 2013

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‘How much money can I make?’ That seems like a fair enough question for a franchisee to ask of a franchisor. After all, the franchisee will be paying a healthy premium for the right to open a restaurant under the franchisor’s trade-mark, so it’s reasonable to wonder what the return on that investment might be. Surely franchisors know the answer, right? Certainly, they have years of sales reports on franchisees to offer some sort of projection for new franchisees, don’t they?

Well, not so fast, prospective restaurant franchisee. Despite the fairness and reasonableness of your query, earnings claims are not only figures that franchisors are not required by law to disclose, but the provision of this information may, in fact, expose franchisors to tremendous potential liability.

But there are definitely times when the disclosure of earnings claims is not appropriate, such as where a first-time franchisor provides sales information for its corporate locations because that’s all of the information that is available – this may be less than helpful for a franchisee since their sales won’t necessarily parallel the experience of the established franchisor. Likewise, a franchisor with units in Saskatchewan only, for example, may wish to think twice before disclosing to its first Toronto prospect how much money can be made, given the considerable disparities between those markets. There are also franchisors who are quite simply not organized to keep good enough records of franchisee performance that a prospective franchisee can rely on that financial information.

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