How Much Can You Make as a Franchise Owner?

The average annual income for franchise owners was reported at $107,119 in 2022, according to a report from Franchise Business Review. However, franchising isn’t a one-size-fits-all business. Franchisors legally cannot provide income amounts or projections of future income. This decision is made to protect the franchisor because they can’t guarantee the same performance for every single franchisee. 

Instead, prospective franchisees should review 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 better idea of the brand’s potential. 

Franchise profitability depends on a variety of factors. Here are a few things to consider. 

Understanding the Initial Investment

Franchise fees, equipment costs, and other initial expenses can vary widely across industries and brands. While some franchises may require a relatively modest investment, others, particularly those associated with well-established and recognized brands, might demand a more substantial upfront financial commitment. 

Revenue and Profit Margins

Once a franchise is up and running, the revenue generated becomes a pivotal factor in determining the income of franchise owners. The revenue, however, is not synonymous with profit, as operational costs, royalties and other ongoing expenses must be subtracted to calculate the actual earnings. Profit margins can fluctuate significantly based on the industry, the brand's popularity and the effectiveness of the franchisee's management.

Multi-Unit Versus Single-Unit

Owning multiple franchise units usually equates to a higher profit margin than owning just one. In the Franchise Business Review report, franchisees operating a single unit report an average income of $90,200 while those with two to four units saw an average annual income of around $132,400. For franchisees who expanded to five or more units, the average franchise owner salary rose to $204,800.

Industry Variations

In the same way that an industry can impact initial investment, it can also impact profit. Fast-food franchises, for example, are known for their high revenue potential due to consistent consumer demand, but profit margins may be slimmer compared to other sectors. On the other hand, service-based franchises might require lower upfront investments and offer higher profit margins, depending on the demand for the services provided in your market. 

Operational Efficiency

The efficiency with which a franchise is operated can be a game-changer in determining the earnings of a franchise owner. Supportive management, streamlined processes and smart financial decisions can contribute to increased profitability. Owners who actively engage in the day-to-day operations, stay attuned to market trends and implement cost-saving measures are more likely to enjoy a healthier bottom line.

With no one answer to how much a franchise can make, prospective franchisees should assess their financial capabilities and carefully evaluate the specific terms of the franchise agreement to make informed decisions about potential earnings and overall business viability.

Interested in taking the first step in your own franchising journey? 1851 Growth Club will guide you through the buying process with honesty and integrity. Contact us today!