How Franchisors Earn Money
Visualized
Sales | |
Parts Cost | |
Labor Cost | |
Gross Margin | |
Operating Expenses | |
Marketing | |
Occupancy | |
Other Expense | |
Total Operating Expense | |
Operating Profit | |
Depr, Amort, Taxes | |
Net Income |
Royalty on Sales:
Franchisor earns a % of your gross sales.
Rebates from Vendors:
Franchisor may receive rebates from vendors based on franchisee purchases
Advertising Fund Contributions:
Franchisees contribute a % of sales to a marketing fund managed by franchisor
Related-Party Transactions:
Franchisor or affiliates may earn income from required parts vendors they own or control
Real Estate & Leasing:
Franchisees may lease their shop from the franchisor or a related company
Technology or Service Fees:
Franchisees pay fees for required tech or operational systems
Shared Investment & Profit Split:
Franchisor may help fund the business and receive a share of the profits
Related-Party Transactions:
Franchisor or affiliates may earn income from tech or service providers they own or control
Click each number for a description.