Average Franchise Owner Salary

Before investing in a franchise, every potential franchise owner wonders the same thing, “what will my salary be if I were to leave my job to open up a franchise?”

Investing in a franchise is a significant decision that can pave the way for financial independence and entrepreneurial success. However, one of the most critical factors prospective franchise owners consider is the potential earnings from their investment. Understanding the average franchise owner’s salary is essential for making informed decisions, setting realistic financial goals, and ensuring a satisfactory return on investment. This article delves into the factors that influence franchise earnings, compares the income potential across various industries, and provides insights into how owner involvement impacts profitability. Whether you’re contemplating a hands-on role or a semi-absentee ownership model, this comprehensive guide will equip you with the knowledge to navigate the financial landscape of franchising effectively.

Why is it important to know what franchises make?

Understanding the earnings potential of a franchise is crucial for several reasons. Here are the key factors highlighting its importance:

• Setting realistic financial goals: Knowing the potential earnings helps prospective franchise owners set realistic financial goals. It enables them to plan for the initial investment, ongoing expenses, and the timeline to profitability.
• Evaluating return on investment (ROI): Earnings data is essential for evaluating the return on investment (ROI). Prospective franchisees can compare different franchises to determine which offers the best financial prospects relative to the initial and ongoing costs.
• Assessing financial viability: Understanding what a franchise makes allows investors to assess the business’s financial viability. This includes gauging whether the revenue generated will cover operational costs and provide sufficient income.
• Risk management: Knowledge of franchise earnings helps in managing risks. By understanding the financial performance of a franchise, investors can better anticipate potential challenges and prepare contingency plans.
• Making informed decisions: Having access to accurate earnings information enables prospective franchisees to make informed decisions. This includes choosing the right franchise that aligns with their financial goals and risk tolerance.
• Understanding industry standards: Comparing earnings across different franchises helps investors understand industry standards. This insight is valuable for setting benchmarks and identifying franchises that outperform their peers.
• Securing financing: Accurate earnings data is often required when seeking financing. Lenders need to see detailed financial projections and historical performance to assess the creditworthiness of a potential franchise investment.
• Planning for growth: Knowing potential earnings aids in long-term planning. Franchisees can use this information to strategize for growth, reinvest in the business, and plan for expansion.
• Personal financial planning: Understanding franchise earnings is essential for personal financial planning. It helps prospective franchisees determine if the franchise can meet their income needs and support their lifestyle.

How to calculate franchise owner salary and earnings?

Calculating the earnings of a franchise involves a straightforward formula: subtracting the total expenses from the gross sales. Here’s a step-by-step guide to understanding and performing this calculation:

Step 1: Calculate annual gross sales

Gross sales represent the total revenue generated by the franchise from all sales before any expenses are deducted. This includes income from product or service sales, memberships, and any other revenue streams. To determine gross sales, you can sum up all sales transactions over a specific period, such as monthly, quarterly, or annually.

Example:

Let’s say you are looking at a franchise with monthly gross sales of $50,000, which would indicate annual gross sales of $600,000. Note that you can find this data on Vetted Biz on each franchise listing or sometimes you may find the information in the Franchise Disclosure Document of franchises where they disclose their offerings, which you can also find on our website.

Step 2: Identify and list expenses

Expenses include all costs associated with running the franchise. These can be categorized into several key areas:

1. Franchise fees: Initial and ongoing fees paid to the franchisor.
   • Monthly royalty fee: 5% of gross sales
   • Monthly ad fund fee: 2% of gross sales
2. Operating costs: These are the day-to-day expenses required to run the business. These are also found in a franchise’s FDD which you can find on our website.
   • Rent: $3,000/month
   • Utilities: $500/month
   • Inventory: $5,000/month
   • Equipment maintenance: $300/month
3. Employee salaries: Wages paid to staff and managers.
   • Monthly salaries: $10,000
4. Marketing costs: Expenses for local advertising and contributions to the franchisor’s marketing fund.
   • Local advertising: $1,000/month
5. Miscellaneous expenses: Other costs that might include insurance, legal fees, and supplies.
   • Insurance: $200/month
   • Legal fees: $100/month
   • Supplies: $300/month

Step 3: Calculate total monthly expenses
Sum all the expenses to get the total monthly expenses.

Example:

• Franchise fees (5% of $50,000): $2,500
• Rent: $3,000
• Utilities: $500
• Inventory: $5,000
• Equipment maintenance: $300
• Employee salaries: $10,000
• Local advertising: $1,000
• Marketing fund (2% of $50,000): $1,000
• Insurance: $200
• Legal fees: $100
• Supplies: $300

Total monthly expenses:
$2,500 + $3,000 + $500 + $5,000 + $300 + $10,000 + $1,000 + $1,000 + $200 + $100 + $300 = $23,900

Step 4: Calculate net earnings

Subtract the total monthly expenses from the gross sales to determine the net earnings.

Net earnings formula: net earnings = gross sales – total expenses

Example calculation: net earnings = $50,000 – $23,900 = $26,100

Thus, the net earnings for the month would be $26,100.

Will you be active as the primary operator or semi-absentee in the business?

Deciding whether to be an active operator or a semi-absentee owner in your franchise is a critical choice that can influence the success and profitability of your business. Each approach has its advantages and challenges, and many franchisees find that their role evolves over time. Here’s a closer look at both options and how your involvement may change as your franchise grows.

Active ownership: hands-on involvement

Initial phase: establishing the business – As an active owner, you immerse yourself in every aspect of the business, from daily operations to customer interactions. This hands-on approach helps you gain a deep understanding of the business model and operational nuances. You are directly involved in hiring, training, and managing staff. This ensures that employees are well-versed in the franchise’s standards and can deliver excellent service. Your active presence allows you to implement and oversee marketing and sales strategies effectively. Engaging directly with customers can build loyalty and drive repeat business. Being on-site daily gives you control over quality assurance, inventory management, and financial oversight, enabling quick decision-making and problem-solving.

Benefits of active ownership – Direct involvement provides comprehensive insights into all business aspects. Frequent interactions with customers help build strong relationships and loyalty. Hands-on management ensures adherence to the franchise’s standards and protocols.

Cons of active ownership  – You will need to be focused on working in and on the business full-time if you are an active owner. This means that you may need to forego other work and/or investment opportunities due to limits on the amount of time you may have.

Transitioning to semi-absentee ownership: delegating daily operations

Growth phase: scaling the business – As the business stabilizes and grows, you may hire a manager to handle daily operations. This allows you to step back from the day-to-day tasks while ensuring that the business runs smoothly. Your role shifts to a more strategic focus, overseeing business performance, financials, and long-term planning. This enables you to work on the business rather than in the business. If you plan to expand and open additional franchise units, a semi-absentee model becomes more feasible. Delegating operations allows you to manage multiple locations effectively.

Benefits of semi-absentee ownership – Reduced daily involvement can provide a better work-life balance and more flexibility. Easier to expand and manage multiple units without being overwhelmed by daily operations. Freed from operational tasks, you can focus on growth strategies, marketing, and financial planning.

Cons of semi-absentee ownership – If you are a semi-absentee, you will forego some amount of earnings in order to have the proper management system in place.

Evolution over time: from active to semi-absentee

Starting active – Most franchisees start as active operators to establish a strong foundation, understand the business, and build a reliable team. By being actively involved initially, you build trust with your employees and customers, creating a loyal base that supports the business’s growth.

Transitioning gradually – Gradually delegate responsibilities to trusted managers and staff as you gain confidence in their abilities. Implement systems to monitor business performance remotely, such as regular reports, financial statements, and key performance indicators (KPIs).

Achieving semi-absentee status – Once you have a reliable management team in place, you can transition to a semi-absentee role, focusing on strategic growth and new opportunities. While not involved in daily operations, periodic visits and reviews ensure that the business continues to meet standards and perform well.

What do owners of popular franchises make?

Let’s have a look at how much owners of popular franchises make

What is the salary for a McDonald’s franchise owner? (typically semi-absentee)

The median annual sales volume of franchised McDonald’s restaurants is roughly $3,366,000. Such high sales volumes are indicative of the strong brand presence and customer loyalty that McDonald’s franchises enjoy.

To provide a clearer picture of the financial prospects, we can analyze the potential profits and the time required to recoup the initial investment based on different profit margins. The midpoint of the initial investment required for a McDonald’s franchise is approximately $1,800,000. Using this investment figure, we can estimate the time it would take to recoup the initial costs under various profit margin scenarios. Here’s a breakdown of the estimated profits and the time to recoup the investment:

At a 15% profit margin:

• Estimated profits: $436,200 annually
• Time to recoup investment: 6.5 years (including 2 years for scaling up)

With a profit margin of 15% or more, it would take approximately 6.5 years or less to recoup the initial investment. This timeframe considers a scaling-up period of two years, reflecting the typical time it takes for a new franchise to reach optimal operational efficiency.

What is the salary for a Chick-fil-A franchise owner (typically owner-operator)?

Chick-fil-A is known for its relatively low initial franchise fee of $10,000, making it an attractive option for potential franchisees. However, Chick-fil-A’s financial model is unique, as the corporation covers most of the initial setup costs, which can range from $219,055 to $2,912,697. In return, franchisees pay 15% of sales plus 50% of pretax profit monthly.

Chick-fil-A franchise owner salaries are influenced by several factors, including location, sales volume, and operational efficiency. The average annual gross sales for Chick-fil-A franchises in freestanding, non-mall locations was an industry-leading $9,274,890 in 2023. This strong performance reflects Chick-fil-A’s brand strength, strong product, and high customer loyalty.

Chick-Fil-A’s financials:

• Earnings (owner-operator): $631,000. Yes, this is an insanely high amount, but it is very hard to get a Chick-Fil-A franchise and requires a high amount of commitment with a unique franchise business model.

Chick-fil-A’s unique financial model involves significant profit-sharing of 50% with the franchisor. Note that this is after the 15% royalty. Successful franchisees can expect extremely high earnings, with a ridiculously quick payback period as Chick-fil-A corporate covers the vast majority of the upfront investment costs.

What is the salary for a Subway franchise owner (typically owner-operator)?

Subway is one of the largest and most recognizable fast-food brands globally. However, the franchise owner’s salary for Subway can vary widely. Subway’s estimated system-wide franchise sales were approximately $9.6 billion, with the average revenue per franchise being around $455,000.

Using this average revenue, let’s analyze the potential profits and the time required to recoup the initial investment based on different profit margins. The midpoint of the initial investment for a Subway franchise is about $364,475.

Note that Subway has had many issues over the years in relation to their unit profitability. We have researched and published our findings at length in the past, which you can find here.

At a 10% profit margin:

• Estimated profits: $45,500 annually
• Time to recoup investment: 10 years

Best ways to find franchise owner salary information

On Vetted Biz

On Vetted Biz, you can easily find key figures, such as franchise salary or franchise earnings, for any franchise by navigating to the specific franchise listing page.

Once on a franchise listing page, you can access detailed information such as return Payback Period, Gross Sales and Earnings by year.

Additionally, each listing page has Investment Range, which provides the total estimated initial investment required to start the franchise, and Royalty Fee, which indicates the ongoing percentage of monthly gross revenues paid to the franchisor. Additionally, you can view the Franchise Fee, a one-time upfront cost for obtaining the franchise rights.

These figures are crucial for potential franchisees to understand the financial commitment involved. Vetted Biz also includes free access to Vetted Member subscribers to the Franchise Disclosure Document (FDD), which offers a comprehensive overview of the franchise’s financial performance, obligations, and historical data, helping users make informed investment decisions.

Or you can try speaking directly to franchisees to figure out the franchise owner salary

1. First-hand experience – Current franchise owners have direct experience running the business and can provide you with practical insights into the financial realities of operating a franchise. They can share their earnings, expenses, challenges, and the time it took for them to become profitable.

2. Realistic expectations – Franchisees can offer you a realistic view of what to expect in terms of income. They can tell you how their earnings have changed over time, what factors have influenced their profitability, and what you might expect based on your specific location and circumstances.

3. Operational insights – Franchisees can provide valuable operational insights beyond salary information. They can discuss what strategies have worked for them in increasing sales and managing expenses, which can directly impact your potential earnings.

4. Understanding variability – Franchisee earnings can vary widely depending on location, management style, market conditions, and other factors. By talking to multiple franchisees in different areas, you can get a sense of this variability and better understand the range of potential earnings.

5. Building a network – Establishing relationships with existing franchisees can be beneficial beyond just salary information. You can build a support network of experienced operators who can offer advice, mentorship, and support as you navigate your franchising journey.

How to approach franchisees:

• Identify potential contacts: Start by identifying franchisees by speaking with the franchisor, the franchisor’s website, franchise directories, or by visiting local franchise locations.
• Prepare your questions: Make a list of questions focused on earnings, expenses, challenges, and advice. Be respectful of their time and be prepared with concise, relevant questions.
• Request a meeting: Reach out to franchisees via email, phone, or in-person visits to request a meeting or a call. Be clear about your intentions and express your appreciation for their time.
• Attend franchise events: Participate in franchise expos, webinars, and franchisor-sponsored events where you can meet and network with current franchisees.

Sample questions to ask:

1. What was your initial investment, and how long did it take you to recoup it?
2. What are your average monthly and annual earnings?
3. What are the major expenses you incur regularly?
4. How has your income changed over time?
5. What advice would you give to someone considering investing in this franchise?

Work with a franchise specialist

One of the most reliable ways to obtain comprehensive and accurate franchise salary information is to work with a franchise specialist. Here’s why:

• Expertise and experience: Franchise specialists have extensive knowledge and experience in the franchising industry. They can provide valuable insights into the financial performance of various franchises, including typical earnings, profit margins, and timeframes for recouping investments.
• Access to data: Franchise specialists have access to detailed and proprietary data that is not readily available to the public. This includes financial performance reports, earnings disclosures, and benchmarks for different franchise brands.
• Personalized advice: A franchise specialist can offer personalized advice based on your financial goals, investment capacity, and business preferences. They can help you understand which franchises align best with your expectations for earnings and profitability.
• Franchise disclosure documents (FDD): Specialists can help you navigate and interpret Franchise Disclosure Documents, which contain critical financial information about the franchise, including initial investment costs, ongoing fees, and historical financial performance.
• Network connections: Franchise specialists often have connections with current franchise owners and franchisors. They can facilitate introductions and help you gather firsthand information about franchise owner salaries and business experiences.
• Guidance through the process: From initial research to final decision-making, a franchise specialist can guide you through the entire process of selecting and investing in a franchise. This ensures you have all the necessary information to make an informed and confident decision.

Conclusion

Investing in a franchise is a significant decision that can pave the way for financial independence and entrepreneurial success. However, one of the most critical factors prospective franchise owners consider is the potential earnings from their investment. Understanding the average franchise owner’s salary is essential for making informed decisions, setting realistic financial goals, and ensuring a satisfactory return on investment.

This article looked into the factors influencing franchise earnings, compared the income potential across various industries, and provided insights into how owner involvement impacts profitability. Whether you’re contemplating a hands-on role or a semi-absentee ownership model, this comprehensive guide equips you with the knowledge to navigate the financial landscape of franchising effectively so that you may know any potential franchise owner salaries as you search for the right franchise for you.