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An income guarantee can provide a sense of security for new franchisees while they establish their new business.

US brand puts evening meal on the menu.

It is important before signing up to a franchise to understand exactly what is being offered, whether it is turnover or leads related, and appreciate any time and performance limitations.

What is an income guarantee? It sounds like a promise of a set amount of revenue to your business, but this can take many forms.

For instance, an income guarantee could be the franchisor’s commitment that if a franchisee doesn’t reach an expected revenue level within a set timeframe, the franchisor will top up the income to the benchmark amount.

Of it could be a salary provided by the franchisor to the franchisee as they build up their business.

Another version could be a set number of leads to convert, or existing business contracts to fulfil, which should provide the franchisee with a certain amount of revenue.

Of course, there are caveats with an income guarantee, as with any element of small business. Lawyer Robert Toth cautions prospective franchise buyers to do their homework on any income guarantee and to seek legal advice before accepting it.

“They can often be tied to certain pre-conditions that cannot be met, which may make the guarantee useless. This may make it also an unfair contract term and be misleading conduct, so check the fine print.”

Here are some brands who offer new franchises an income guarantee.

JAMES’ HOME SERVICES

Rhiannon Simcocks, national operations manager, explains the deal.

“We offer a $1000 per week income guarantee for the first 12 weeks. It is conditional upon the new business-owner adhering to our systems and procedures, and implementing the training and actions that we consider is our ‘business as usual’.

“These include marketing time spend targets, following our quoting system as trained and responsiveness to enquiries received.

“The conditions are our expectations for how the business is run ordinarily, so we see that implementing the income guarantee can actually assist the new business-owner to set great business management habits from the start.”

Rhiannon says some, but not all, new business-owners will take up the income guarantee.

“Of those that do, we find that perhaps we top up a little of their income in the first and second week, then after that, we hardly ever have a call on the income guarantee.

“We set new business-owners up with a dedicated advertising package for their territory as well as a suite of marketing collateral and the training on how to market their business effectively (all included when you purchase a James’ Home Services business).”

The business also utilises other strategies to drive enquiries to new business-owners.

For James’ Home Services franchisees, much of the work can come from repeat customers (particularly for Interior Cleaning and Lawn Mowing & Garden Care) and that makes it all the more important to secure the right customers early in the business.

It can mean a weekly service, and once these build up there’s a level of certainty about the weekly revenue.

“We also offer weekly mentoring for new business-owners to ensure we are building on the initial training they undertake, and genuinely continuing to expand their business management skills,” says Rhiannon.

So why does the franchisor offer this income guarantee?

“We recognise that for a lot of our new business-owners, they are leaving full-time employment, where income each week is certain. So we can appreciate the uncertainty that starting your own business may bring, particularly for those with family and mortgage commitments.

“We focus on finding new business-owners who are a great fit for our network and culture, who are prepared to work hard and follow our proven systems, and who we believe have the drive to make their new business work.

“If we find that right person, we are only too happy to help remove some of those initial fears and barriers to starting their own business with us. Additionally, we know that the training, support and marketing that we offer can, and does, get our new business-owners off to a strong start; we back ourselves and we are experienced in helping small business-owners to get started effectively.”