FranNet Franchise Analysis For 2024 (Reviews, Cost & More)
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.
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.
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 expediture | Amount | To Whom Payment Is To Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial Franchisee Fee | $5,000 | $10,000 | Franchisor |
| Equipment and Computer System | $2,500 | $5,000 | Suppliers |
| Supplies | $500 | $500 | Suppliers |
| Pre-Opening Training | $1,500 | $3,000 | Suppliers |
| Marketing Program | $2,904 | $2,904 | FranNet Marketing Program |
| Prepaid Insurance Premiums | $1,000 | $1,000 | Franchisor/Insurers |
| MyFranNet Technology | $350 | $350 | Franchisor |
| Additional Funds (6 months) | $10,000 | $20,000 | Suppliers |
| Total | $23,754 | $42,754 | |
There are limited competitors that offer the opportunity to franchise or own a consulting firm for franchises.
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 sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $42,754 | 40% | $97,600 | 2.30 years |
| 50% | $122,000 | 2 years | |
| 60% | $146,400 | 1.88 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.
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) | ||
| 2021 | 2020 | |
| 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 |
Consolidated Statements of Cash Flows – Years Ended December 31, 2021 and 2020
| (In thousands) | ||
| 2021 | 2020 | |
| 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 year | 334,357 | $(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 Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 55 | 54 | -1 |
| 2020 | 54 | 49 | -5 | |
| 2021 | 49 | 47 | -2 | |
| Company-Owned | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Outlets (United States) | 2019 | 55 | 54 | -1 |
| 2020 | 54 | 49 | -5 | |
| 2021 | 49 | 47 | -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.
