Home Care Franchise Opportunities Win the Profit Margin Race

So, how much can you earn by opening a franchise unit? According to a large survey by the research firm Franchise Business Review, the average franchisee across the spectrum earns a profit of $66,000 annually. Beyond that, it’s hard to generalize, since there can be major differences between concepts even in the same sector.

Entrepreneur Magazine spoke with franchisors and franchisees in restaurants, mobile opportunities and personal-service companies to estimate the profits one might expect when investing in different types of businesses. More important, they picked their brains to discover the moves smart franchisees make to increase their margins.

Fast Food and Profits- Bring Experience to the Table.

Jeff Elgin, CEO of franchise referral firm FranChoice, believes that to make a go of it in the food business, operators must be extremely smart right out of the gate. “Restaurants are tough businesses with much, much smaller margins than other franchises,” he says. “It’s very unforgiving. You have tiny margins and can’t afford to make mistakes.”

According to a report on food franchising by Franchise Business Review, 51.5 percent of food franchises earn profits of less than $50,000 a year; roughly 7 percent top $250,000, with the average profit for all restaurants coming in at $82,033. That doesn’t sound too bad, until you factor in the initial investment. Though some basic restaurant concepts cost less than $100,000 to open, many established brands require as much as $500,000 to start. And a full-service restaurant may require an initial investment of $1 million or more.

There’s no question, however, that a well-operated restaurant can be a cash cow, even with the higher overhead expenses. In 2007, when Dean Clarino bought his first Teriyaki Madness location in Las Vegas, he didn’t have any food-service experience. But he was passionate about making the store work.

Tips for Success in Any Business Model: Get to Work!

Dean blanketed the surrounding area with advertising, and each week he invited a local business to come in for a free lunch. His enthusiasm paid off, and he watched customer counts and revenues grow steadily.
When he was ready to open a second location in the endcap of a suburban strip mall, he knew that keeping his rent reasonable was key. In fact, he says he walked away from negotiations with the landlord six times before signing a lease on 2,300 square feet of space.
After securing the lease, the first thing Clarino did was install signs outside of his restaurant facing in all directions; for 72 days during construction, the lunchtime crowd saw his signs from the windows of other restaurants. When his second Teriyaki Madness opened in 2011, it saw $126,000 in business during its first month. Clarino says he made back his investment in just four months.
Currently, his first location grosses $900,000 per year, and his newer store makes $1.2 million. With 20 percent margins–incredibly high for a restaurant–he estimates profits at $400,000 per year.

Don’t Be Typical, Go Above and Beyond:

He didn’t just follow the franchisor’s system; he spent more than advised or required, maxing out his spending on advertising.
Doing the minimum required by a franchise system is not the way to make big numbers–he recommends doing as much as possible in the beginning, theorizing that if franchisees are scrimping on advertising or labor in the first year just to keep the doors open, they didn’t have enough operating capital, to begin with.

What About a Mobile Business?

Alex Cunningham, a Florida-based business consultant who focuses on maximizing franchisee profits, says that when starting a mobile business (or ANY business), franchisees need to be outgoing and have a sales and marketing mindset to succeed. “People who don’t prospect for business are going to have a hard time,” he warns.

David Messenger, vice president of market expansion for Memphis, Tenn.-based ServiceMaster, a family of brands that includes the Furniture Medic and ServiceMaster Clean mobile franchises, believes marketing, especially in the startup months, is the differentiator between average and high-profit franchisees.

“Marketing can be the biggest discouragement,” he says. “Franchisees can spend a lot of money for two to three months, not see results and then give up. But it will eventually work. That’s one area where franchisors need to help guide franchisees, especially if they don’t have a lot of experience in marketing.”

High-touch, Higher Profits: The Personal-Service Sector FOR THE WIN!

Agency-style businesses–like maid services and home healthcare, where the franchisee acts as a hub for independent contractors–are the hottest sector of franchising right now.

Home healthcare, in particular, is in high demand, mainly because aging Baby Boomers want to stay in their homes as long as possible and are opting for in-home nursing care and assistance rather than moving to assisted-living facilities. But the other reason those franchises are so popular is the profit margin. According to Franchise Business Review, the average profit on senior-care franchises is $98,723 per year.

“The typical investment for senior care is less than $100,000, and most are grossing $1 million or more in a year or two,” says Elgin of FranChoice. “They are intensely the most profitable franchises. But you have to do lots of marketing.”

Overhead on these businesses is low, but any savings can be whittled away quickly by lack of business.

It’s not the hard costs that shock people. It’s the fact that it could take two to three months to find your first client. Franchise owners need to learn how to be a salesperson. It takes a while. The first three to six months you’re introducing yourself to the market, and you have to prove that you can provide quality care. Then the market responds, and business picks up.

Have realistic expectations. Oftentimes, people haven’t thought about the amount they’ll need to live on while starting their business. In reality, a business that looks like it will take $50,000 to start might take $80,000 or $100,000. If you’re capitalized well, you don’t have the stress and worry thinking about overextending yourself, and the result is you’ll grow quicker. That’s the real key.

Watch Your Costs

Even though different franchise categories have different issues when it comes to making money, Elgin believes there are three areas that all franchisees need to pay close attention to in order to thrive.

“To maximize profitability, good operators focus on three areas--labor, rent and cost of goods sold,” he says. “It’s often the little stuff that eats away your profits. If you save a few points here and there, your profit and loss statement can get stunningly better.”

In fact, with many businesses operating with single-digit profit margins, a half percent here or a percent there is often the difference between being in the red and being in the black. The road to profitability begins in the very first stage, Elgin says, and negotiating rent can be a determining factor.

“You have to make sure you get the right terms or you’re going to live with that mistake for years and years,” he says. “The best operators have good real-estate attorneys and drive hard bargains. It’s fun to watch–they negotiate deals so much better than other franchisees get.”

Elgin says labor is another expense that can eat profit margins if it’s not controlled. Like Clarino of Teriyaki Madness, restaurateurs need to constantly make sure their staffing levels are in sync with customer traffic. Without a clear understanding of customer patterns, those numbers can quickly get out of whack.

Cunningham notes that part of the burden of profitability falls on the franchisor, too. The amount of training and support franchisees receive can be critical in helping them get up to speed quickly. “Support and training are paramount,” he says. “If you get two or three weeks of training, that’s great. All those things drive a more successful business. Those collective resources result in higher profitability if the support is there.”

Summary

Best profit margin? Home Care Franchises and other Personal Services
Key Elements of Success? Get out there and market your business. Do MORE than the franchisor recommends. Pur your heart and soul into making it work. The rewards will follow!
Keep an Eye on Costs: The costs of labor, rent, and goods sold are important to keep under control. Profits run away quickly when these aren’t managed well.
Support: Go with a franchisor that offers excellent training and support.

If you have questions about owning a Golden Heart Senior Care Franchise, please contact our office at 1-800-601-2792 , or check out our form at https://goldenheartfranchise.com/apply-now/.

Source: https://www.entrepreneur.com/article/228698#