Maximizing Your Franchise's Profit Potential

This article was written by Jeff Elgin of Entrepreneur.com

This is such a great topic. It reminds me of the joke we used to tell as kids, "How can you immediately double your money? Fold it in half and put it back in your pocket!" So how can you make a lot of money as a franchisee? At the risk of sounding trite, the easiest way is to start by selecting a franchise opportunity that is capable of making a lot of money.

Actually, there are a number of things you can do to increase your chances of making good money as a franchisee. Though picking the right opportunity where others are making a lot of money is a good start, it is no guarantee you will do the same. The keys to making as much money as possible include:

1. Starting with the right definition. This goal begs the question, "What is a lot of money?" Many people think of this answer first in absolute terms such as making a fixed amount like $100,000 per year. I think it is wiser to define "a lot of money" in terms of return on investment. If you can invest $5,000 and get a return of $25,000 per year, I'd contend you're making a lot of money on that investment by any reasonable standard of measure.

2. Starting with the right opportunity. It's essential to select an opportunity that matches up well with you, in which you are willing and capable of performing the primary role of the franchisee.

As just one example, I know of a franchise that cleans public restrooms. This can be an intensely profitable business with a great return on investment, but many people simply wouldn't want to be involved in such a business. Their reluctance would probably mean they wouldn't make a lot of money, because they couldn't project the excitement and enthusiasm necessary to sell a prospective customer on the value of a sparkling urinal.

3. Keeping the investment size reasonable. A host of franchises can produce a great return on investment. Make sure you focus on ones where the per-unit investment is reasonable given your net worth and the liquid capital you have available to invest. Remember what your mom told you about not putting all your eggs in one basket.