For businesses that you’re really outsourcing a whole function of your business, we’ve seen royalties in the teens, as a percentage of your sales, your revenue. And also if you’re more independent and you want flexibility, franchising might not be the right fit for you.
So you’ve always dreamed of having a restaurant, and you love to incorporate the cooking that you used to have as a child with your grandmother. You can’t do that for 90% plus of food franchises. It’s really that they have their product mastered, and they have their own executive chef and they’re rolling out. And yes, you can give the franchisor feedback.
But it’s really what they decide to do. You open up a Chick-Fil-A franchise, you’re not going to start selling hamburgers there. You open up a Starbucks, you can’t sell any type of coffee at a Starbucks licensee cut with a franchise. Also, it can take some time until you break even and really start making revenue. So it’s really important to understand talking to the franchisor and talking to franchisees.
Are you expected to break revenue in the first month, three months, six months? Is this going to drag all the way out to 12 months, understand when franchisees past the break even point and start making money, it’s really important for you to understand that.
And for franchising, generally, you’re doing it full time. Whereas a startup you might be able to do it on the side. So you still have that cash flow coming in from your day job.