How Do Franchise Owners Get Paid?

Are you toying with the idea of buying into a franchise? With the number of franchise businesses that you drive by daily, it is a tempting business model to get into. If you are thinking about taking the step and becoming a franchise owner, there are a few questions that you need to ask.

• What franchise should you buy into?
• What are the costs associated with owning a franchise?
• How much time do you have to invest in franchise ownership?
• How do franchise owners get paid?

The good news is that most franchises are easy to research. It is quite easy to discover the specifics that relate to starting with any particular franchise. Learning about franchise owner income information is a little bit trickier.

Getting Paid As a Franchise Owner

Being a franchise owner is not cheap, so before putting a focus on how and how much you will get paid, it is essential to take note of what fees you should be expected to payout.

Costs Associated With Owning A Franchise

Franchise Specific Fees

When you buy into a franchise, you pay the franchisor in three ways.

Franchise Fee

The Franchise fee paid at the beginning of the process. This fee is paid to cover the costs of training, site selection, distribution, IT, etc.

Franchise Royalties

Franchise Royalties are paid, often monthly, to the franchisor. These royalties are usually between 4% and 15% of your revenue.

Let’s say you pay a 5% royalty, and your company revenue is $1 million for the year. You will pay $50,000 per year in cold hard cash. This is $50,000 of real money right out the door.

Franchise Marketing Fees

Franchise marketing fees are typically based upon your company’s revenue calculated every month. Franchisors pay a significant amount of money every year for advertising on television, ads, billboards, etc., which is excellent for your business.

Still, you are expected to pitch into this fund.

Start-Up Fees

In addition to your initial franchise fee, you need to prepare yourself for the initial start-up fees of opening a business. Most businesses cost a significant amount of money to start.

Some franchise companies can be started for less than $10,000, while some can run as high as $1 million. However, most run between $75,000 to $200,000 to start.

Costs Associated with Owning a Business

In addition to franchise expenses and start-up fees, you also need to be prepared to pay typical costs associated with owning a business. These expenses include:

• Rent or Mortgage
• Payroll
• Insurance
• Taxes
• Inventory
• Utilities
• Equipment
• Miscellaneous

How Much Money Do Franchise Owners Make?

Of course, a franchisor cannot tell you that you can expect to make XX amount of money each year. That, of course, could open them up to legal issues, but know that you, as a franchise owner will get paid from the profits generated after you have paid all of the fees associated with your franchise business ownership.

According to studies that have been done, while some franchise owners can make upwards of $250,000 per year, most franchise owners earn between $60,000 and $70,000, although the first couple of years may be considerably lower than that.

It is also worth noting that there are a significant number of franchise owners that get comfortable in their ownership role and buy more franchises as they find success, which increases their income.

If this happens make sure you invest in a good credit card processing service for your business. You'll need it. 

What Franchise Should You Buy?

Determining what franchise to buy into is perhaps the biggest decision that you need to make during this process. Many experts strongly recommend that you have a background in whatever niche you have chosen for your franchise.

This is especially true if you are wanting to own a restaurant franchise, due to its particular requirements and the high expense associated with starting up a restaurant franchise.

How much time do you have to invest in franchise ownership?

Like any business, you need to be prepared to invest a significant amount of time in your franchise ownership. No business, not even a franchise, runs itself.

You must have the drive and the desire to make your business a success, and that means that you are ready to invest not only money but also time into it. Of course, you need to be very organized too so your business can run more efficiently.

Do you own a franchise?  Do you have any tips, tricks, or advice that you would be willing to share with others who are considering this type of venture for themselves?