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FranNet Franchise Analysis For 2022 (Reviews, Cost & More)

Written by: Tyler Morris
Last Updated by Rocío Torres: September 1, 2022
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FranNet is a limited liability company based out of Louisville Kentucky. FranNet specializes in franchise consulting services. FranNet recognizes the complex process of opening a franchise and aims to help all operators. The Chief Executive Officer of FranNet is Jania Bailey, and has been in this role since 2015. 

Contents

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At the end of 2021, there were a total of 47 outlets. All 47 of these locations are franchises, meaning that the company does not have any corporate owned locations. At the start of 2019 there were 55 total franchise locations, since then the total number of outlets has decreased by 8 locations.

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How Much is a FranNet Franchise?

The initial franchise fee ranges between $5,000-$10,000. This is paid in a lump sum and is due at the signing of the Franchise Agreement.

FranNet Franchise Cost?

The estimated total investment necessary to open a franchise ranges between $23,754 – $42,754.

Estimated Initial Investment

Type of expeditureAmountTo Whom Payment Is To Be Made
LowHigh
Initial Franchisee Fee$5,000$10,000Franchisor
Equipment and Computer System$2,500$5,000Suppliers
Supplies$500$500Suppliers
Pre-Opening Training$1,500$3,000Suppliers
Marketing Program$2,904$2,904FranNet Marketing Program
Prepaid Insurance Premiums$1,000$1,000Franchisor/Insurers
MyFranNet Technology$350$350Franchisor
Additional Funds (6 months)$10,000$20,000Suppliers
Total$23,754$42,754 

There are limited competitors that offer the opportunity to franchise or own a consulting firm for franchises. 

frannet franchise

FranNet Franchise Requirements

Franchisees must operate a website and FranNet has the right to monitor and operate your website. Additionally, FranNet will help provide guidance to all operators. All operators within 3 months of signing the franchise agreement must complete a training program with all associates and employees. 

Owning a Frannet Franchise Requires Ongoing Fees:

Royalty Engagement Income: FranNet typically collects 50% of Gross Income from the signing of franchise agreements. If you refer an individual any income that is earned FranNet collects 10%. Finally for any other income, FranNet collects 25% of that revenue.

Marketing Fee: $1,452 per month or no more than 10% of annual income. 

All operators must pay $350 per year for the right to operate FranNet.com.

How Much do FranNet Franchise Owners Make

The Average FranNet Franchise Owner in 2021 was paid commission of $244,000 from FranNet LLC.  FranNet LLC keeps about 10% of the placement fee when the FranNet franchisee sells a franchise. So if the franchisor compensates 50% of the franchise fee of $40,000 for a successful sale, FranNet LLC receives $20,000 then pays the Franchise Owner $18,000.

 While FranNet does not provide an average profit margin please find a table below estimating the time to recoup your investment. 

2022 Average Sales

Initial investment (midpoint)%Profit margin of median franchise salesEstimated ProfitsTime to recoup investments
$42,75440%$97,6002.30 years
50%$122,0002 years
60%$146,4001.88 years

The profit margin is quite high for this industry as the franchise owner has minimal costs besides admin and marketing expenditures.

FranNet franchises are able to recoup their investment in a rapid manner. This is due to their limited initial investment to open a location. The time to recoup investment includes 1.5 years to account for the process of developing and opening the franchise. There can be limited revenue earned during this period delaying the time to recoup the initial investment. 

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Is the FranNet Franchise Profit Worth the Franchise Cost?

What can you expect to sell a FranNet franchise for after recouping your initial investment?

Under $1 Million Net Sales

0.89 * Net Sales

0.89 * $244,000

The average FranNet franchise can expect to be sold for about $217,000

How much does FranNet (the Franchisor) make?

Consolidated Statements of Income and Changes in Members’ Equity – Years Ended December 31, 2021 and 2020

(In thousands) 
20212020
Contract Revenues
Commissions income$13,022,959$12,159,307
Franchisor membership and Zor Admin income$1,303,230$1,258,799
Meeting income$698,457$728,750
Residual and retainer income$667,,451$604,643
Administrative income$443,613$396,678
Marketing income$310,979$322,695
Training$6,000$10,200
Total revenue$16,452,719$15,481,072
Direct Costs
Commissions$11,504,039$10,590,110
Residual and retainer expense$361,281$323,063
Marketing costs$241,342$368,398
Meeting expense$36,989$34,458
Training$15,092$14,730
Total direct costs$12,158,743$11,330,759
Gross profit$4,293,976$4,150,313
Operating Expenses
General and administrative$3,179,652$3,326,623
Depreciation and amortization$64,082$51,935
Total operating expenses$3,243,734$3,378,558
Net income$1,050,242$771,755
Members’s Equity
Beginning of year$4,751,888$4,757,989
Purchase of outstanding shares $(18,822)
Members’ distributions$(998,569)$(665,328)
Cumulative effect adjustment $(93,706)
End of year$4,803,561$4,751,888
frannet franchise

Consolidated Statements of Cash Flows – Years Ended December 31, 2021 and 2020

(In thousands) 
20212020
Cash Flow From Operating Activities
Net income$1,050,242$771,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization$64,082$51,935
Loss on investment in affiliate $5,342
Gain on foreign exchange$(631)$(1,948)
Cumulative effect adjustment $(93,706)
Decrease (increase) in assets:
Contracts receivable$49,174$97,884
Other current assets$(129,465)$56,014
Increase (decrease) in liabilities:
Accounts payable$7,979$(150,242)
Accrued expenses$7,447$14,361
Deposits and deferred revenue$288,009$(20,849)
Net cash provided by operating activities$1,336,837$730,546
Cash Flows From Investing Activities
Fixed assets purchased$(3,911)$(62,023)
Net cash used in investing activities$(3,911)$(62,023)
Cash Flows From Financing Activities
Members distributions$(998,569)$(665,328)
Repurchase of shares $(18,822)
Net cash used financing activities$(998,569)$(684,150)
Net change in cash at the beginning of the year334,357$(15,627)
Cash and restricted cash at the beginning of the year$2,789,304$2,804,931
Cash and restricted at the end of the year$3,123,661$2,789,304
Reconcilition of cash and restricted cash
Cash$3,002,388$2,736,987
Restrictedd cash for marketing purposes$121,273$52,317
 $3,123,661$2,789,304

FranNet LLC earns a significant amount of revenue from the standard commissions of registering new Franchises. Additionally, Franchise membership earns the company over a million in revenue. 

How Many FranNet Locations Have Opened and Closed?

System-wide Outlet Summart For Years 2019-2021

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised20195554-1
20205449-5
20214947-2
Company-Owned2019000
2020000
2021000
Total Outlets (United States)20195554-1
20205449-5
20214947-2

The last few years FranNet has been on the decline. The company had 55 locations at the start of 2019 but since then has had 8 locations closed. This is an indicator that some locations are struggling and the company is failing to replace them with more successful locations.

Conclusion

FranNet is one of the largest and most respected franchise brokerage groups.

The financials of FranNet appear to be healthy for franchisees. However, there is limited information about the profit margin. Additionally, with 8 of 55 locations closing over the past three years this is an indication that the franchises may not be as profitable as they appear. Be sure to check out alternatives on the Vetted Biz Professional Business Services Page.  

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