Part of the Series Building a Franchise Brand: The Preservan Journey | Lessons in Franchising, Growth & Leadership
4 Posts | View All
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Franchising Your Business: The Decision to Franchise
Published in: Articles
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Franchise Sales: Expectations vs. Reality
Published in: Articles
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The Shift from Founder to Franchisor
Published in: Articles
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(Currently Reading) The Economics of Franchising and Why Unit Level Profitability Comes First
Published in: Articles
What Is Unit Economics in Franchising and Why It Determines Whether a Franchise Can Scale
Unit economics in franchising refers to the revenue, operating costs, and profit generated by a single franchise location. It is the foundation of every profitable franchise system. If a franchisee cannot consistently reach profitability, the franchisor cannot build sustainable royalty revenue, support the system, or scale responsibly. Before selling franchises, founders must understand whether one unit works economically, because scaling a broken model only multiplies risk.
Ty McBride, Founder of Preservan, shares the financial truths of franchising and why building from the unit up is the only way to create real enterprise value.
Success in franchising is often framed as a numbers game. More territories. More franchisees. More growth. But in Episode 4 of Building a Franchise Brand, Ty McBride pulls back the curtain on what actually determines whether a franchise system survives or collapses.
This guide is for business owners and emerging franchisors who are evaluating what franchising really is, whether franchising is the right growth strategy, and how to structure a profitable franchise model.
For McBride, the turning point came when he realized the system would never outperform its franchisees.
“You have to start with the franchisee. You have to start with the unit level economics because however your model is designed, their success is going to directly impact whether you can be successful financially.”
That single realization reshaped how Preservan engineers growth.
In franchising, unit economics refers to the revenue, expenses, and profit generated by a single franchise location. It determines whether a franchise system can scale sustainably or collapse under growth.
When Franchise Sales Stop Being the Growth Strategy
Most founders enter franchising believing scale comes from volume. McBride admits he once saw it the same way. The industry reinforces that belief by highlighting initial franchise fees and development velocity.
Looking back, he describes the early mindset shift that had to happen.
“When I first started thinking about franchising, all the information you see is about acquiring new franchisees. You start thinking it is all about the number of franchisees you are going to bring on.”
But experience revealed a deeper truth.
“You only want to acquire new franchisees so they can generate revenue and you can acquire the royalties from their strong performance. You have to flip the mindset.”
- Engineering. Designing franchisor economics before validating unit profitability creates misalignment.
- Pressure. Sales driven growth hides weak performance instead of fixing it.
- Reversal. Starting with franchisee success protects long term scalability.
Action points and goals
- Audit your unit economics across all locations
- Compare top performers to underperformers
- Redefine growth success around franchisee profit
Your goal: Move from selling franchisees to building enterprise value.
Building a Franchise Model Around Vehicles Not Franchises
Rather than projecting growth by counting locations, Preservan grounded its model in operational output.
McBride explains how the team reframed the way they built the business case.
“When we started mapping out financial viability, we did not think about the number of franchisees. We thought about the number of vehicles we had to have on the road. That is what would drive product purchases and royalties.”
This shifted the focus to what truly produces revenue.
- Revenue. Average job size and volume determine earning potential.
- Capacity. Technician output defines scale limits.
- Efficiency. Revenue per hour reveals economic health.
Action points and goals
- Identify your true production unit
- Connect operations to revenue drivers
- Build forecasts based on throughput
Your goal: Tie growth to controllable operating metrics.
Capital and Capacity Redefine Franchisee Selection
Preservan no longer evaluates candidates by their ability to write a check. That shift came after painful early lessons.
“We were evaluating whether somebody could pay the initial franchise fee. That was a mistake. Now we evaluate whether they have the capital and capacity to build a business that can generate the revenue we expect.”
The standard became performance readiness, not purchasing power.
- Capital. Financial runway supports ramp up and reinvestment.
- Capacity. Leadership predicts performance.
- Reinforcement. Profitable franchisees strengthen the system.
Action points and goals
- Redesign franchisee qualification criteria
- Set minimum capital benchmarks
- Screen for leadership capacity
Your goal: Build operators, not buyers.
Market Fit is an Economic Decision
Some markets look attractive on paper but fail under economic reality. Preservan learned to trust the data.
“We get territory checks for Phoenix all the time, but we know it is not right for our model. The conditions for the services we provide just do not exist there.”
Strong territory strategies and franchise market research protect both the brand and its franchisees.
- Thresholds. Markets must meet performance requirements.
- Discipline. Saying no protects system health.
- Sustainability. Expansion without fit increases risk.
Action points and goals
- Define market viability benchmarks
- Validate demand and cost conditions
- Decline misaligned territories
Your goal: Let data guide expansion.
Every Franchise Needs Two Financial Models
Most founders are handed an FDD and told they are ready to franchise. What they are rarely shown is whether the business of franchising will ever work financially.
McBride was stunned when he realized this gap.
“Not a single one of them ever sent me a pro forma of what the business model of franchising actually looks like. I had to build one myself.”
Without this visibility, founders are guessing at fees, royalties, and support structures. They are building growth plans without knowing if the system can ever fund itself. This is one of the most common reasons franchise systems struggle to reach royalty sufficiency.
- Franchisee. Reveals whether individual units can truly reach profitability.
- Franchisor. Shows when royalty revenue can sustain the support organization.
- Sensitivity. Exposes how fragile the model becomes when performance drops.
Action points and goals
- Build a unit level pro forma for your prototype
- Build a franchisor pro forma that models system wide costs
- Stress test both models at 80 percent and 50 percent performance
- Adjust fees, royalties, and support budgets to close gaps
Your goal: Know exactly when your system becomes self sustaining and what it takes to get there.
Slowing Down to Grow Stronger
Fast growth often feels like success. But scaling before the system is ready can lock in failure.
After rapid expansion, Preservan faced a defining choice: chase more franchise sales or strengthen the foundation.
“We could go get more franchises or we could focus on making sure our franchisees had kickass years.”
They chose performance. That decision changed everything and positioned Preservan for stronger Item 19 disclosures and more credible franchise sales.
- Focus. Investing in existing franchisees creates real proof of concept.
- Proof. Strong results strengthen your Item 19 and sales credibility.
- Leverage. Validated performance attracts better candidates and partners.
Action points and goals
- Reallocate time and budget toward franchisee success
- Track unit KPIs consistently across the system
- Use performance data to refine training, marketing, and support
Your goal: Build momentum that compounds instead of momentum that collapses.
First Right Then Fast
Most franchise brands fail not because they lack ambition, but because they scale before the foundation is ready. Speed magnifies whatever is underneath. If the economics are broken, growth only accelerates the damage.
McBride’s philosophy is simple, but unforgiving.
“First right, then fast. Focus on getting the unit economics right. Once you do that, it is easy to turn the growth engine on.”
This is not about moving slowly. It is about moving intentionally. It is about earning the right to scale by proving the model works at the unit level first.
• Fundamentals. Strong unit economics protect the entire system.
• Discipline. Validation prevents fragile growth.
• Endurance. Sustainable models outlast hype driven expansion.
Final goal: Build a franchise system that creates long term enterprise value, not short term momentum.
About Preservan
With a mission of “preserving the past,” Preservan’s wood care, repair and restoration services help homeowners and businesses protect their windows, doors, fences and decks from wood rot using innovative epoxy resin technology. Learn about franchising opportunities with Preservan here: https://gopreservan.com.
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