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How Profitable Is Owning a Franchise?




Owning a franchise can be a rewarding business venture, but profitability depends on various factors, including the industry, franchise brand, and how well the business is managed. According to Franchise Business Review in 2024, the average franchise owner earns over $100,000 annually. However, these figures vary widely depending on the franchise and individual management skills. Here, we explore key factors influencing profitability and how you can set realistic expectations.
 

Start-Up Realities and Financial Planning 

Many franchisees face an initial period where they can’t take money out of the business. During the start-up phase, which can last several years, you may need alternative sources of income, such as a spouse’s salary or savings, to cover living expenses. Planning for this phase is critical to your success. 

Talking to existing franchisees can help you confirm whether your income expectations and business projections are realistic. At The Human Bean, we emphasize the importance of transparency and encourage prospective franchisees to review Item 19 of our Franchise Disclosure Document (FDD). This section contains essential financial performance data, including Average Unit Volume (AUV). 

Understanding Average Unit Volume (AUV) 

AUV is a key metric that represents the average annual revenue generated by franchised locations. It is calculated by dividing the total revenue of all applicable units by the number of units. The Top Quartile AUV at The Human Bean is $1,239,635* and the Average AUV is $888,813* AUV While AUV provides insight into revenue potential, it doesn’t account for operating expenses like rent, labor, and other expenses. Franchisees must factor in these costs to estimate profitability accurately. 

Factors Influencing Profitability 

  1. Established Brand - Recognizable brands like The Human Bean, which has been franchising since 2003 attracts loyal customers. 

  1. Market Demand - Coffee remains one of the most popular beverages in the U.S., with 67% of adults drinking coffee daily, according to a National Coffee Association survey. Strong demand ensures steady traffic and healthy margins. 

  1. Franchise Support - The level of training and ongoing support can significantly impact your success. The Human Bean provides comprehensive training, operational evaluations, marketing support, and ongoing coaching to help franchisees thrive. 

  1. Prime Locations - High-traffic, easily accessible locations increase your chances of profitability. At The Human Bean, we assist with franchise site development to secure locations. 

  1. Marketing and Advertising - Most franchisors, including The Human Bean, handle large-scale campaigns and offer local marketing resources. The Human Bean’s Marketing Studio and Local Store Marketing Playbook provide customized tools to help franchisees effectively engage their communities. 

Initial Investment and Ongoing Fees

Understanding the financial commitment is crucial. The Human Bean’s franchise fee is $30,000 with no ongoing royalty fee on sales. Instead, we generate revenue from bulk supply sales to franchise partners. Franchise partners contribute 1% of gross sales to a Brand Fund, which supports brand promotion and drive-thru marketing efforts. This structure ensures alignment between franchisor and franchisee goals.  The Human Bean offers a 20% off our initial franchise fee for Military veterans as a thank you for their service. 

Making an Informed Decision 

The Human Bean’s commitment is to provide prospective franchise partners with all the information they need to make an informed decision. Studying the FDD, especially Item 19, and connecting with current franchisees are essential steps. Our goal is to ensure there are no surprises and that you have the tools and support to succeed. 

Owning a franchise can be a profitable endeavor with the right planning, support, and management. By understanding the factors that influence profitability and leveraging the resources provided by your franchisor, you can maximize your chances of success.

*AUV is the average unit volume from the calendar year 2023. 53 stores surpassed and 56 stores made less than the listed AUV. Median was $859,940. some outlets have sold or earned this amount. Your individual results may differ. There is no assurance you'll sell or earn this much. For more information, see item 19 of the franchise disclosure document(FDD). 1,251,709 is the top quartile average unit volume of the best-performing franchisees is 2022. 11 surpassed and 16 made less. Median was 1,207,887.