How Much Do Franchise Owners Really Make a Year?
Michael Nicholas / Franchising / November 27, 2023
Exploring the earnings of franchise owners often leads to the pivotal question: How much does a franchise owner make a year? This question, essential to anyone considering the leap into franchising, reveals a complex situation with few straight answers.
To shed light on this topic, we’re diving into data from Franchise Business Review, Glassdoor, Zippia, and ZipRecruiter to assess how much franchisees make on average and the potential yearly earnings one can expect.
By analyzing average incomes across various industries and markets, we aim to provide a comprehensive understanding of how much a franchise owner makes a year, guiding those interested in this path.
The earning potential of franchise owners can vary widely, shaped by factors like industry, location, and individual business strategy, with reported salaries for franchise owners in the United States ranging from as low as $39,000 to as high as $204,800 annually. This range highlights the significant variability in income potential within the franchising world.
Keep in mind these are just reported ranges of salaries. A franchise owner is a business owner, so they make money two different ways. One is by paying themselves a fair market salary for their services working for the company they own, and the second way they make money is if their business(a franchise in this case) makes a profit. If the franchise makes a profit, then the franchise owner makes money there as well.
To better understand these differences, we’ve gathered data from various sources, providing a comprehensive overview of what franchise owners really earn across different contexts and scenarios.
Franchise Business Review’s recent survey of nearly 30,000 franchisees offers valuable insights into the question, “How much do franchisees make?” The average annual income for franchise owners is reported at $107,119.
Notably, franchise owners who have moved beyond the startup period, typically the first two years in business, see their average incomes increase to $118,792. This figure is significantly higher than the average salary of independent small business owners, which is $64,432 according to PayScale, showcasing a distinct advantage in the franchise model.
The report also illustrates the impact of owning multiple franchise units. Franchisees operating a single unit report an average income of $90,200, while those with two to four units see their average annual incomes rise to $132,400. For franchise owners who expand their portfolio to five or more units, the average franchise owner salary escalates to an impressive $204,800.
Glassdoor data sheds light on the earnings of franchise owners in the United States based on self-reported salary data. Their estimated total annual pay for a franchise owner is approximately $98,162. This information is based on Glassdoor’s proprietary Total Pay Estimate model, which draws from salaries reported by users plus extra pay, which can include bonuses, commissions, tips, and profit sharing. This extra pay can vary significantly depending on the specific pay models and profit-sharing structures of different franchises.
The ‘Most Likely Range’ of total pay, falling within the 25th to 75th percentile of all reported data, spans from $74,000 to $137,000 annually. This detailed breakdown offers a realistic view of the average franchise owner salary, reflecting the varied compensation models across different franchises.
According to Zippia, the average salary for a franchise owner in the United States is notably lower than other sources, at $49,588, with a typical range between $39,000 and $62,000 annually. Zippia further breaks down these figures by state, providing a regional perspective on franchise owner salaries.
The lower figures reported by Zippia might be attributed to their data collection methodology, which includes a mix of employee self-reports, public internet data, and proprietary information from other companies. This blend of sources, while offering diverse insights, also introduces a potential for variance in accuracy, especially considering the self-reported nature of some data.
ZipRecruiter’s state-by-state analysis of franchise owner salaries reveals that the national average salary is around $109,437, aligning more closely with other sources like Franchise Business Review. They provide a detailed regional breakdown, highlighting Minnesota as the top state with an average annual salary of $119,885 for franchise owners.
ZipRecruiter’s methodology involves estimating compensation ranges for job listings where the employer does not state a pay range. This approach factors in the job title, location, and hiring company to generate their estimates.
While these figures are based on a robust algorithm, it’s important for potential franchise owners to consider that these are estimates and may not completely align with the actual compensation range, which can fluctuate based on numerous factors.
The Franchise Business Review report offers insight into the average salaries within various sectors, showcasing which industries may be the most profitable. Here’s a look at some key industries and their average franchise owner salaries.
This sector includes companies that provide services to other businesses, such as consulting, marketing, and cost reduction services. These franchises often offer unique advantages, particularly in scalability and market demand. For instance, P3 Cost Analysts, a leader in cost reduction, combines strong market demand with a proven business model, making it an attractive option for those who want to work from home and scale without having to open multiple locations.
Including a range of services like beauty, fitness, and cleaning, this industry caters directly to individual consumers. The high average salary reflects the consistent and growing consumer demand for personal services, driven by increasing disposable income and a focus on health and wellness.
The senior care industry, significantly impacted by demographic trends such as an aging population, has seen a growing demand for elder care services. This sector includes a range of services like in-home care, nursing homes, senior living relocation services, and specialized healthcare. The high average salary in this industry reflects not only the essential nature of these services but also the expanding market as our population ages.
The pet services industry, covering everything from grooming to pet daycare, capitalizes on the strong emotional bond people have with their pets. With increasing pet ownership and willingness to spend on pets, this industry has seen substantial growth, reflected in its attractive average salary.
As you can see from the numbers above, the world of franchising offers a vast range of income potential. Due to this range, pinpointing an exact franchise owner salary can be challenging. However, there are several key factors that may determine how much franchise owners can earn.
The geographic location of your franchise can significantly influence your earnings. Franchises situated in high-traffic areas or regions with a strong demand for your product or service tend to generate higher revenues and profits.
The choice of industry can be a major driver of profitability. Some industries inherently yield higher profit margins than others, such as those listed above. For example, healthcare or specialized retail franchises may be harder to break into but often offer greater earning potential compared to highly competitive industries.
Franchisees with prior industry-specific experience may find it easier to adapt and operate efficiently. Experience can lead to better decision-making, streamlined operations, and a quicker return on investment, all contributing to higher earnings.
The level of support and training provided by the franchisor can directly impact profitability. Franchise systems that offer comprehensive training programs, ongoing assistance, and marketing support enable franchisees to navigate challenges effectively and drive revenue growth.
The royalty structure established by the franchisor is a critical factor in determining earnings. Higher royalty rates may reduce a franchisee’s profitability, while those with reasonable royalty fees can retain a larger share of their earnings, contributing to a healthier owner income.
The number of franchise locations you operate can significantly influence your earnings. Owning multiple franchise units within the same or different franchise brands can offer several advantages in terms of profitability.
Understanding these factors is essential for making informed decisions and when considering the average franchise owner salary.
Franchise Business Review stands out as potentially the most reliable source, having directly surveyed nearly 30,000 franchisees. However, it’s important to acknowledge that their data, like the others, is self-reported. This aspect underscores the need for a cautious approach in interpreting these figures, as self-reported data can be subject to biases and individual variances.
The ranges of franchise owner salaries reported by these sources are quite broad, highlighting the variability in earnings across the franchise industry. This disparity can be attributed to several factors, including the franchise’s location, the specific industry, and the operational efficiency of each franchise. Such variability suggests that prospective franchise owners should consider a wide array of factors when evaluating potential earnings.
Despite differences in the numbers between sources like Zippia and ZipRecruiter, there is a consistent trend where franchise owners in the Northeast, West Coast, and Midwest regions generally report higher salaries. This geographical trend is a crucial consideration for potential franchisees, as it indicates that location can significantly influence the financial success of a franchise.
While these data sources provide valuable insights into the potential earnings of franchise owners, they should be viewed within the broader context of the franchise industry. Earnings can be influenced by the type of franchise, its geographic location, and the individual performance of franchise owners. This understanding is essential for potential franchise owners, emphasizing the need to consider these estimates as part of a comprehensive research process before making a decision.
The financial compensation for franchise owners is quite different from regular salaried employment. A franchise owner’s income primarily comes from the profits of the business, which is the revenue left after all operating costs are covered. These costs include not just typical business expenses like staffing, supplies, and property maintenance but also specific franchise-related fees.
For instance, franchisees must pay initial buy-in fees to acquire the franchise rights and ongoing royalties, which are often a percentage of the gross sales or a fixed fee. These royalties can significantly impact the overall profitability, as they are a recurring expense directly tied to the business’s revenue.
In addition to managing these financial aspects, franchise owners are heavily involved in the day-to-day operations, which includes responsibilities like hiring and training staff, maintaining the property, and ensuring adherence to the franchisor’s standards. This hands-on management is crucial, especially in the initial years when the focus is on establishing the business and recovering the initial investment.
It’s common for franchise owners not to see substantial personal income until the business becomes firmly established, which can take a couple of years. During this period, the franchise owner’s role is to ensure the stability and growth of the business, often putting their personal salary secondary to the needs of the franchise. This startup period can be minimized by proper research and planning when deciding on the most profitable franchise for you.
Choosing the most profitable franchise requires careful consideration and thorough research. It’s not just about brand power but also understanding the finer details that contribute to long-term success. Here are key steps to guide you in this crucial decision-making process:
Franchise Disclosure Documents (FDDs) are loaded with information important financial information about a franchise. They provide details on everything from the company’s legal and financial history to its operational requirements. Carefully comparing the FDDs of different franchises can reveal insights into their stability, growth potential, and potential owner income.
Understanding the cost structure of a franchise is vital. Franchise fees and ongoing royalties can vary significantly and will impact your profitability. Assess these costs in relation to the value and support the franchisor provides.
The success of a franchise heavily depends on its location and the market it serves. Investigate local market demands, competition, and economic conditions to determine the most favorable locations for your franchise.
A realistic grasp of the operating expenses is crucial. This includes costs like rent, utilities, staffing, and inventory. Knowing these will help you calculate potential profit margins and manage cash flow effectively.
The level of training and support a franchisor offers can greatly influence your success. Look for franchises that provide comprehensive training programs, marketing support, and ongoing assistance, as these can play a critical role in navigating challenges and driving growth.
P3 Cost Analysts stands out as a highly attractive franchise opportunity, especially for those seeking a competitive franchise owner salary. Unlike other franchises that require multiple units for revenue growth, P3 can easily be scaled without additional locations.
Franchisees benefit from low operating expenses and the ability to operate remotely in any U.S. market. All franchisees are backed by strong franchisor support. This includes comprehensive training and access to a team of industry experts, ensuring a smooth start and ongoing success.
The core of P3’s model is helping businesses save on recurring costs, creating a win-win scenario where franchisees share in the savings they identify for clients. This approach, combined with effective marketing and client relationship strategies, positions P3 franchisees for high earning potential.
It’s an opportunity that balances profitability with an in-demand B2B business model, making it an attractive choice for entrepreneurs aiming for high franchise owner salaries in a supportive and growing industry.
Exploring how much franchise owners make in a year, we’ve seen the influence of factors like industry, location, and franchisor support. While income can vary, there are steps that potential franchise owners can make during the research stage to help ensure they earn on the upper end of these ranges.
Opportunities like P3 Cost Analysts stand out for their unique business model, offering substantial earning potential with low operating expenses and robust support.
If you’re inspired to join a thriving industry and maximize your earnings as a franchise owner, contact us to start or visit our franchise page to start your journey with P3 Cost Analysts.
