How Much Do Franchise Owners Make a Year?

One of the first questions people ask themselves when they start thinking about how to start a franchise is “can you make a good living owning a franchise?” It is a very good and important question, and definitely should be on the list of things to consider before deciding to open a franchise. However, it doesn’t have a quick and easy answer. The franchise owner salary will depend on a number of different factors, including:

• Type of franchise
• Amount of time in business
• Area of the country
• Location of franchise
• Owner’s previous experience and skill at running the business

We will go into each of these factors and how they might affect a franchise owner’s take-home pay. To give you a rough idea of the median annual income for a franchise owner in the food and drink industry is $70,000. We think getting an idea of the range in franchise owner pay is also important, so 37% of franchise owners made under $50,000 a year, and 16% made more than $200,000 (source).

How Much Does a Typical Franchise Owner Make by Industry?

The example we gave above was for a franchise owner in the food and drink industry, which is one that many people think of when they consider owning a franchise (fast food and restaurants being very popular franchises most of us see every day). But how does this compare to other franchise types? According to Zippia, these are the average salaries from some of the most popular franchise industries:

• Manufacturing - average salary $91,334/year
• Construction - average salary $61,741/year
• Healthcare - average salary $59,769/year
• Hospitality - average salary $54,952/year

How Much Does a Single Franchise Owner Make?

Although "how much does a franchise owner make?" sounds like a straightforward question, the answer is more complicated than you might think. One consideration is that many franchise owners own multiple locations within their franchises (also called a multi unit franchisee). When looking at data on franchise owner salaries, it is often not possible to separate out owners who own a single franchise location, as opposed to all franchise owners. Since about half of franchise owners do own multiple locations, the multiple franchise owner salary numbers will skew the data in that direction.

Owning multiple franchises can be profitable even more than owning a single location. This presents great franchise owner opportunities for future growth if you decide to become a franchise owner and would like to increase your salary. Some franchise owners go on to own more than two locations, so there is almost unlimited growth potential if being a franchisee is a good fit for you!

Is Owning a Franchise Profitable in the First Year?

Like nearly all businesses, most franchise locations will not be profitable in the first year. The upfront expenses to become a franchise owner like rent costs, renovation costs, and other set up costs will be tens to hundreds of thousands of dollars (depending on the franchise and location). Many people will take out a loan or other financing that will need to be paid back, with interest, on these up front costs. Additionally, the first year of running a business will likely be slower, since customers do not know about your location yet.

Opening a franchise has some major advantages over starting a new business from scratch, though. Because you will be operating as an established brand, a new franchise will start with an established customer base and brand recognition right off the bat. The additional support from the parent company for things like training, advertising, and operating guidelines make it that much easier to get started rather than trying to build everything yourself from scratch.

Some new franchise owners prefer to keep their existing jobs or rely on family financial support during the first year or two of starting a brand new franchise to make this financial transition more comfortable. Careful consideration of your own budget and net worth are important before making the decision to start a franchise. Try our net worth calculator to help you consider how much you can afford to spend on the perfect franchise for you. Our finance center is another great resource for finding out your financing options available to make the move to business ownership easier.

How Does the Owner of a Franchise Make Money?

We’ve talked a lot about the salary of a franchise owner already. Still, it can be unclear exactly how a franchisee makes money from their franchise if you are not familiar with the franchising model. In essence, a franchise owner makes money like any other small business owner, by paying themselves using the profits of the business.

Let’s look at an example of a hypothetical food franchise to better explain the details. In one year, the Food Franchise:

• Sells $1.4 million worth of products.
• Pays about $1.3 million in expenses (employees, rent, stock, equipment, taxes, royalties)
• Makes a profit of $100,000 which is used to:
  • Invest back into the business - like opening another franchise location
  • Keep on hand as working capital for business expenses
  • Pay salary of owner - One of the many perks of being a franchise owner is that you get to decide how much of the profit you pay yourself as a salary.

Is Owning a Franchise Passive Income?

Owning a franchise location or locations is often not considered to be passive income, but it can be. According to Investopedia, “passive income is earnings from a rental property, limited partnership, or other business in which a person is not actively involved.” In general, when you decide to become a franchisee, you will be actively involved in managing the franchise. You will usually:

• Hire the management team for the location (or take on that role yourself)
• Choose the business location and oversee renovations
• Receive training from the parent company on how to run the franchise
• May deal with some of the day to day running of the business

But there are several franchise opportunities, like vending machine franchises and digital billboard franchises, that are inherently less actively managed. And there are many cases where people open a franchise, set it up to be successful, and then leave the daily running to a general manager. In all of these cases, owning a franchise could be passive income.

Do Franchise Owners Get Rich?

Franchise owners can get rich in the right circumstances. Although there are no guarantees of income with a franchise, starting your business with a proven business model and an established brand gives you a head start. In fact, franchise businesses drive 1.8 times higher sales than comparable non-franchise establishments. As a franchise owner, more sales translates into a higher salary for many franchisees.

In general, established franchises that operate in areas with a lot of demand for their product and have lower overhead costs will be more profitable. Also, people who are able to own multiple franchise locations generally have a higher income than single franchise location owners.

If you are inspired by all the possibilities owning a franchise opens, take a look at our list of The Top 50 Franchises. These provide a great selection of some of the top performing and most desirable franchises with up-to-date information on how to begin your journey with them.

How Do I Find Out What I Will Make as a Franchise Owner?

As we've mentioned before, a lot of factors impact franchise owners' incomes, so there’s no way to know exactly what your salary might be. But there are some ways to get a better idea of what sort of income you might expect as a franchisee:

• Read all of the franchise information provided by the franchise you are interested in. Most will give ranges and averages for franchise owners in different areas to ensure you know what you are getting into before you decide if this franchise is the right fit for you. Here’s our resource for helping you understand a franchise agreement.
• Talk to other franchise owners. Contact other owners of your franchise and ask them about their business. Make sure you contact several, as there can be quite a wide range. It’s also worth finding locations that are likely to be similar to yours. This might mean locations in similar-sized towns, or in the same general area, to get the best idea of what to expect from your location. Many parent companies will provide contacts for other of their franchisees who can act as support and mentors for new franchisees.
• Do research on your franchise industry in your area. There are many great sources for things like average employee wages in your area, as well as average profit by industry. For example, a fast food chain in your area of the country may have an average return of 8-12% - meaning if you do $1M in sales, you are likely to have between $80,000 and $120,000 of profit after paying your expenses.

Franchise Opportunities: Your Next Opportunity is Calling

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