Owning a franchise can be quite lucrative, but how do you know you're getting the most bang for your buck? Learn how to calculate and understand franchise ROI.
Estimate Your Return on Investment
Return on investment, or ROI, is a benchmark for measuring the performance and profitability of an investment. Calculating ROI is fairly straightforward for passive investments where you are simply investing money, such as buying stock or bonds. The ROI is a percentage representing how much money you made in an investment, minus the cost. If you invest $50 and receive a return of $5, your ROI is 10%. Experts agree that a passive investment generating an ROI between 5% and 12% is worthwhile.
Understanding Franchise ROI
Unlike a stock or bond, calculating the return on investment for an entrepreneur is personal. Small business owners invest time, money, and talent into their venture, which makes ROI harder to measure. It is up to you to determine the value of your time. You may define your value as your salary in the corporate world, or you may have higher expectations. Small businesses can take advantage of a variety of tax deductions which can have a positive impact on your ROI.
Franchise ROI varies widely, depending on location and the size of your customer base and demand. The franchise industry provides resources and guidance to help determine if your ROI will meet your financial goals.
Do the research. Conducting market research can help bring you a step closer to determining the value of franchise investment. The franchise industry offers business opportunities in 29 industries, including food service, car repair, personal care, and business services. Selecting a franchise in a thriving industry can help increase your ROI.
Franchises in the personal services category were slated to rise in 2022 as people resumed business travel and personal vacations, according to the International Franchise Association. Home remodeling and new home construction are propelling the commercial and residential services sector. Rising inflation and a looming recession make it vital to explore recession-resistant franchise opportunities, such as auto repair, childcare, or accounting.
Focus on Item 19. Every franchisor is required to provide prospective franchisees with a Franchise Disclosure Document, or FDD. The FDD outlines the franchise agreement and provides details on investment requirements, training, marketing, and expectations. Item 19 of the FDD outlines the earnings performance of existing franchise owners and can help you make financial projections for your business.
Tap your network. One of the perks of franchising is capitalizing on the knowledge and skills of existing franchise owners in your system. Hearing their stories and asking questions about the performance of their location can help you form expectations.
Moran Sets Franchisees Up for Success
At Moran Family of Brands, we’ve honed the franchise process at each of our brands so all of our owners can maximize their franchise ROI. Moran is the franchisor of six brands in the automotive and window tinting industry, including Milex Complete Auto Care, Mr. Transmission, and Turbo Tint. Demand in the aftermarket auto industry is rising. The aftermarket auto industry earned $325 billion in 2021 and is forecast to reach $372 billion by 2024.
Our franchise training program, co-branding initiative, and focus on communication give franchise owners the tools they need to build their customer base and become a one-stop shop in their local community.
Top-notch training. All of our franchise owners attend Moran University where we equip them with the insights and skills they need to be competitive in the aftermarket auto industry. Our franchise owners do one week of online pre-training at home before traveling to our corporate headquarters for classroom training. It’s followed up with a third week of training at an existing locations to get a hands-on look at the business.
Co-branding focus. Co-branding allows our franchise owners to operate two distinct brands under one roof. It gives them a consumer advantage and helps generate higher average ticket prices.
Ongoing support. As the automobile industry evolves, keeping up with new standards and fixes can be challenging for small business owners. Moran’s communications team stays abreast of new developments to ensure our franchise owners have up-to-date information to serve customers.
Visit Moran Family of Brands to request information and learn more about the benefits of investing in the auto repair industry,