Know Your Numbers

As a franchise advisor, I coach people on the importance of knowing the numbers involved with any franchise opportunity.? This includes understanding the upfront and operating costs as well as the Unit?Economics.??This refers to understanding the?revenue?and the?expenses?of a business and seeing what falls to the?bottom line.??

Another term for bottom line is?Net Profit.? This is what’s left after expenses and taxes are paid.?The summary of all this?information is a financial report called the?Profit and Loss Statement.?

Important Note:?Only franchisors with Item 19s in their Franchise Disclosure Documents (FDDs) provide any kind of numbers like this. The overwhelming majority of franchisors do NOT have a written Item 19 in their FDDs. In addition, each Item 19 is unique - there’s not a consistent reporting format for it so carefully read all the fine print.

So?how do you get this crucial information??Since most franchisors don’t have an Item 19 in their FDDs, franchise candidates?gather this information?on their own?from?talking to?individual?franchisees. This is a key part of the validation process. A list of all the owners of a franchise or franchisees is in each FDD.

Catch the replay of the Smart Business Strategies podcast?to learn what numbers to expect with a?home-based, need-based service business. This is one podcast you’ll want to?make a priority on your schedule. This will help you Know Your Numbers!