Can You Get Rich from Buying a Franchise?

It is no secret that franchising offers a wide variety of benefits, but like those who are embarking on any business venture, the bottom line for prospective franchisees is often just that — the bottom line. So, just how much money can someone make by investing in a franchise?

According to a survey done by Franchise Business Review, the average pre-tax annual income of franchise owners in the U.S. is about $80,000. However, only 7% of franchise owners earn over $250,000 per year with 51% earning less than $50,000.

Franchisors legally cannot provide income amounts or projections of future income. This is more of a protection for the franchisor, as they can’t guarantee the same performance for every franchisee. Instead, prospective franchisees are advised to check out a franchisor’s Item 19, the section of its franchise disclosure document (FDD) that outlines the brand’s financial performance. The Item 19 usually includes both gross and net numbers so franchisees have a more realistic idea of the brand’s potential.

According to an analysis of FDDs, franchise owners in the restaurant industry earn an average of $82,000 per year, which is pretty solid considering the salary range of a non-franchise restaurant owner can range from $24,000 to $155,000.

But that revenue doesn’t come for free — startup costs for a franchise can range anywhere between $10,000 to millions of dollars, not to mention ongoing royalty payments. A Chick-Fil-A franchise, for example, generates $4.1 million on average annually with an initial investment of only $10,000 because the franchisor covers all opening expenses in exchange for a higher royalty fee. Dunkin’ Donuts locations bring in about $974,000 annually on the low end, with startup costs ranging from $465,000 to $1,597,000. 

The revenue potential of a franchise business will also depend heavily on the industry. The single highest-grossing cleaning franchise, for example, generates $1.3 million per year with an initial investment of $150,000 to $200,000, while one of the leading staffing franchises generates $6,500,000 on average annually per franchise with an initial investment of $150,000.

While financial results may vary, the beauty of franchising is that it offers access to a proven and turnkey business model, as well as the backing of an expert franchisor, which can lower the risk of starting a business at all.

“Business ownership is difficult and it is not for everyone,” said Corey Elias, the owner and franchise broker at Franchise Captain, a company dedicated to helping franchise owners find qualified franchisees through consulting services and funding options. “But owning a franchise lowers that overall risk significantly.”

While making money is certainly one of the primary goals, many entrepreneurs are choosing franchising nowadays as a way to take control of their own destiny while also leveraging a reliable path to generational wealth. Elias says that many franchise owners are seeing higher success rates than those who own independent businesses.

“People are looking for flexibility, better quality of life, being their own boss and the ability to build a legacy, to name a few,” said Elias. “There is data that shows business owners are happier, and much of it goes back to them becoming the captain of their own ship and betting on themselves.”