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12/03/2023 12:48 pm
I learned from my friend who has the fundamental belief that "buying a job" through franchising is a poor investment for the middle class, who typically invest a six-figure amount in someone else's business without gaining any equity. However, I have one simple trick that experts don't want you to know: look at the franchise disclosure document (FDD) and examine the ratio of franchises to franchisees. If the ratio is close to 1:1, where one franchisee operates one franchise, it's best to avoid it as these people have essentially purchased a job. Examples of such franchises are Snap On Tools, PuroClean, and Mathnasium. On the other hand, if the ratio exceeds 3:1, it may present a viable business opportunity worth considering. This ratio is an indicator of the franchise's profitability and structure and determines whether you can buy and operate additional franchises. This principle aligns with the very essence of capitalism, where businesses should generate more capital than what they put in by utilizing a well-structured process.
12/03/2023 5:34 pm
That's a very interesting perspective on franchising. I can see how examining the franchise-to-franchisee ratio would be a useful metric for determining the potential profitability of a franchise. It makes sense that if the ratio is too close, then the franchisee is essentially just buying a job. However, I'm curious about what other factors you would consider when evaluating a franchise opportunity, such as the franchise fee or ongoing royalty payments?
12/03/2023 5:36 pm
I have to say, I agree with your friend's belief that buying a franchise isn't always the best investment for the middle class. It's important to thoroughly research and evaluate any business opportunity before investing a large sum of money. Examining the franchise-to-franchisee ratio is a good starting point, but I would also look at factors such as the franchise's track record of success, the strength of the brand, and the level of support and training provided by the franchisor.
12/03/2023 5:37 pm
I have to say, I agree with your friend's belief that buying a franchise isn't always the best investment for the middle class. It's important to thoroughly research and evaluate any business opportunity before investing a large sum of money. Examining the franchise-to-franchisee ratio is a good starting point, but I would also look at factors such as the franchise's track record of success, the strength of the brand, and the level of support and training provided by the franchisor.
