How Do Franchise Owners Get Paid?

In short, the amount of money a franchisee will make depends on various factors, which include the brand, industry, and market you choose. However, you can get more information from Item 19 of the Franchise Disclosure Document (FDD) where the franchisor is obligated to disclose your earning potential. Keep in mind that the franchisor cannot guarantee a specific income amount.

For more information, read our blog: How Much Can You Make as a Franchise Owner

What Are the Overhead Costs of Franchise Ownership?  Every business owner has to factor in the overhead costs before having an accurate picture of their total profit. Some common expenses a franchise owner should consider include:

 

• Equipment (purchasing or leasing)
• Inventory
• Supplies
• Staffing (wages and benefits)
• Utilities
• Rent
• Taxes
• Insurance
• Royalty fees
• Advertising fees

Keep in mind that this is not an exhaustive list. The total amount of overhead expenses will depend on each franchise. For instance, a home-based franchise likely won’t have to pay rent for an offsite location. Furthermore, a restaurant franchise might require a larger staff than a coffee shop franchise. However, all businesses will have some amount of overhead costs to consider. 

How much do franchise owners have to work? The answer to that question depends on the type of franchise you’re talking about. Some franchises require a significant investment of time from the franchise owner, while others (such as a semi-absentee franchise) allow the owner to be more hands-off. While the specific duties of an owner depend on each franchise, prospective franchisees can generally expect to have the following responsibilities:

 

• Pay franchise fees and royalties
• Acquire and establish a physical location for the business
• Hire, train, and manage employees

Fortunately, franchise owners do not have to figure these things out on their own. They can generally rely on the franchisor to provide training and ongoing support from one degree or another. 

Franchising provides business owners with a replicable business model, which improves their chances of success. However, there are a few variables that will affect the specific outcome of each franchise business. These include:

 

• Overhead Costs – It goes without saying that the expenses for operating a business will affect the total profit, which will impact the franchise owner’s income.
• Industry – Each industry will offer different income potentials for franchise owners. For example, a fast-food franchise is likely to generate more revenue than a coffee kiosk. At the same time, a coffee kiosk will probably have a lower overhead than a restaurant. All of these variables will impact the franchise owner’s final income.
• Location – The location of a franchise will also impact the bottom line. A franchise located in a big city or a high-traffic area has a greater potential to produce more income than one in a small city or a quiet spot of town.
• Business Expertise – The personal skills of each business owner can also impact their total income. Franchisees who are knowledgeable, resourceful, determined, and always willing to learn and adapt to market changes are likely to increase their location’s financial success.
• Investment Strategy – A franchise owner might choose to invest their profits back into the business. While this would require forgoing income for a period of time, it could ultimately increase the success and value of the business.