How to Verify Earnings Projections Before Buying a Franchise

High turnover or a short investment payback period in a franchise proposal is not, on its own, evidence of profitability. What matters is which businesses supplied the underlying data, which costs are included and what assumptions have been made. Before entering the franchise market in Türkiye, you should rebuild the brand’s earnings forecast for your proposed location. This guide explains how to turn figures from a sales presentation into information you can use to make an investment decision.

1. Distinguish between projections, historical results and guarantees

Start by placing every figure you receive into one of three categories: an actual historical result, a forward-looking projection or a contractual commitment. Without this distinction, a feasibility study can make a successful branch’s past performance look like a guarantee of your own future results.

“Our branches achieve this turnover” is not the same as “this is the average for the branches reviewed over a particular period”. Ask the following questions in writing:

• What period does the figure cover, and how many businesses are included?
• Does the data relate to franchisees or company-owned branches?
• Are newly opened, closed or loss-making businesses included?
• Is the result presented an average, a median or the best-performing example?
• Does turnover include VAT, and have returns and discounts been deducted?

Do not treat one successful outlet as representative of the whole network. In particular, showing only businesses that are still trading can conceal the experience of those that have closed. If the scope of the data is not explained, record this as an uncertainty in your model rather than filling the gap with an optimistic assumption.

Also specify the currency used in the figures and the date to which the prices relate. Directly comparing nominal turnover from different periods can create the impression of growth even when sales volumes have not increased. Where possible, examine transaction numbers and average transaction value separately.

2. Examine comparable operating results, not just turnover

Ask the brand for more than a presentation: request a supporting analysis explaining how the figures were calculated. Anonymised branch-level figures prepared with appropriate protection for commercial confidentiality and personal data can be useful. However, ask separately whether the information has been independently audited. Do not assume that a company-prepared spreadsheet has been audited.

Choose a comparison group that closely matches your plans. The performance of an established branch in a busy shopping centre cannot be applied directly to a street-front outlet in a new residential area. Floor area, opening hours, customer footfall, the proportion of delivery sales and the number of months the business has been open all matter.

Next, check how turnover translates into operating results. Alongside the cost of goods, establish whether the calculations include staffing, rent, service charges, energy, wastage, payment processing fees, delivery platform commissions and franchise fees. An example in which the owner works without pay is not equivalent to a business model that requires a salaried manager.

Always ask exactly what is included under “net profit”. A result that excludes depreciation, financing costs and taxes does not show what the investor is left with. Accounting profit and available cash are not the same either. Stock purchases and loan principal repayments, for example, can affect cash differently from profit.

Work with your accountant to cross-check a sample of supporting documents. The aim is not to obtain every record from other businesses, but to establish that the key figures influencing your decision are consistent and can be explained.

3. Rebuild the payback calculation for your own location

Rather than copying the brand’s figures, break the sales forecast down into observable components: daily transaction numbers, average transaction value and the number of trading days. Support these variables with local observations wherever possible. How busy nearby businesses are may offer useful clues, but do not count their customers as your future sales.

Prepare three separate scenarios: expected performance, lower sales and higher costs. These are resilience checks, not statistical forecasts with assigned probabilities. Clearly show which assumptions you have changed in each scenario.

Define consistently what counts towards the initial investment in your payback calculation. A calculation that includes fit-out, equipment and the initial franchise fee but leaves out other pre-opening costs or opening stock can make the payback period look shorter than it really is. Do not assume that every month from opening onwards will match the performance of an established branch.

Answer these two questions separately: when will the business cover its monthly costs, and when will the initial investment be recovered? These are not the same date. Tracking cumulative cash flow month by month is more informative than simply dividing annual profit by the initial investment.

Set your own decision threshold too: at what level of sales does the investment cease to be acceptable? When choosing a brand, this is a more useful basis for comparison than promises of high earnings.

4. Get statements in writing and check their legal significance

Türkiye has no separate law specifically governing franchise agreements, no general mandatory pre-contractual disclosure regime and no compulsory public register specifically for franchise systems. This does not mean that misleading earnings information has no legal consequences.

General legal provisions apply, notably the Turkish Code of Obligations No. 6098 to contractual relationships and the Turkish Commercial Code No. 6102 to commercial relationships. The fundamental basis for the principle of good faith is Article 2 of the Turkish Civil Code No. 4721. The consequences of allegations of misinformation or deception depend on the specific statement, fault, loss and evidence. A projection failing to materialise does not, by itself, create an automatic right to compensation.

Keep presentations, dated financial spreadsheets and correspondence explaining the figures. If the contract states that earnings are not guaranteed, clarify any conflicting statements made during sales discussions before signing. If a commitment is genuinely being offered, work with your lawyer to define its scope, conditions and the consequences of non-performance.

The practical takeaway: Do not base your decision on earnings figures whose source has not been explained. Verify the data, adapt the calculations to your location and consider investing only if you can withstand weaker results as well.