Revenue is not income
The single most common error a first-time buyer makes is hearing a revenue figure and mentally treating it as earnings.
A business turning over $600,000 is not paying its owner $600,000. Depending on the model, it may be paying them $60,000 or $200,000. The revenue number tells you the size of the business. It tells you nothing about what the owner keeps.
What sits between revenue and income
For a home service franchise, the main lines are:
|
Line |
Note |
|---|---|
|
Cost of the work |
The largest single line in a contractor model |
|
Royalty |
Percentage of gross sales |
|
Marketing fund |
Percentage of gross sales |
|
Technology fee |
Percentage of gross sales |
|
Local marketing |
The larger share of marketing spend |
|
Staff |
Customer service, dispatch, admin |
|
Premises |
Modest office rather than retail space |
|
Vehicle |
Owner’s wrapped vehicle |
|
Insurance |
Liability, and provincial coverage where applicable |
|
Software and admin |
Beyond the technology fee |
In Handyman Connection’s model, the revenue split on a job is 47% to the craftsman, 47% to the owner and 5% to the brand. The owner’s 47% is not profit — it is what everything else above comes out of.
Why the margin range is wide
Published net margins in this category typically run between 10% and 35%. That is an unusually wide spread, and the spread is the interesting part.
It is not primarily driven by market size. Two owners in comparable territories can land at opposite ends. What separates them tends to be:
- Advertising discipline. Spending consistently and measuring it, rather than spending reactively.
- Average job value. Whether the office converts small repairs into larger projects over time.
- Repeat business. A mature book costs less to serve. Around 50% of Handyman Connection’s Canadian work is repeat and referral. The economics of that compound over years.
- Staffing decisions. Hiring too early crushes margin; hiring too late crushes growth.
- Contractor retention. Churn is expensive in ways that do not appear as a line item.
What to ask instead of "what will I make?"
No franchisor can answer that question for you, and one who does should be treated carefully.
Ask these instead:
- Will you provide a Financial Performance Representation? In a disclosure document, this is the section where a franchisor may present actual unit performance. Providing one is optional. A franchisor who will not provide any is not necessarily hiding something, but you should ask why.
- May I call any franchisee I choose? Existing owners can tell you things a document cannot. You should get the full list, not three selected names.
- What is the range, not the average? Averages conceal. Ask what the weakest quartile looks like.
- What separates the top performers from the bottom? If the answer is vague, the franchisor may not know their own system well.
- What does year one actually look like, month by month?
The honest summary
Some franchise owners in Canada do very well. Some make less than they would as an employee. The difference is mostly execution, partly market, and partly capital position at the start.
Anyone who tells you otherwise is selling.
How to evaluate a franchisor properly covers the wider due diligence, and what the investment actually is sets out the cost side.
