# Franchise Profits



## tygrus (Mar 13, 2012)

Just doing a little research and I am shocked to find out that owners earn as little as they do from some well known brand names. On average, the owners before tax take home is only about 10% of the gross revenue. So on the top franchises like a McDs or Timmys, thats probably about $200k per year. Its good money, but it would be an all consuming business managing 20 people, staff turnover, customers 24/7, management oversight etc. A lot of stress I would think. Certainly not easy money. 

And if you have a second tier franchise you probably have to own a couple of them to earn a couple hundred a year. 

These look like cash cows but looks are deceiving.


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## FrugalTrader (Oct 13, 2008)

Franchises are a lot of hard work. Owning a single unit is ok, but the real money is owning multiple units (which most franchise owners aim for).


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## Just a Guy (Mar 27, 2012)

The guys I know that own franchises usually hire a key manager and pay them very well to run the day to day operations. The real profits come from selling their working stores and taking over failing ones. Of course it's their managers who do most of the work.

It's not a store manager I'm talking about, it's a business manager, just to be clear.


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## Rusty O'Toole (Feb 1, 2012)

Even the good franchises are set up to enrich the franchise company and pay the franchisee just enough to keep him working.

The bad ones are out and out ripoffs.

There are good businesses that don't require buying a job from a big corporation.


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## Eclectic12 (Oct 20, 2010)

tygrus said:


> Just doing a little research and I am shocked to find out that owners earn as little as they do from some well known brand names. On average, the owners before tax take home is only about 10% of the gross revenue. So on the top franchises like a McDs or Timmys, thats probably about $200k per year ...


A Timmy's owner only makes $200K per year?

Odd ... the law suit that opened the books said that in 2008 *after taxes and interest*, the average Timmy's made $265K, with Saskatchewan topping out at $400K.

http://www.discoveryfinance.com/average-annual-income-of-tim-hortons-owners.html


I'm not finding the article that listed by province ... but this one indicates that Nova Scotia only makes $203K (and says the Sask number is slightly exaggerated as it says $396K).

http://www2.macleans.ca/2011/04/18/always-profitable/


If you really want the "before taxes and interest", the article quotes this figure as being more like $1.5 million.


It is hard work.


Cheers


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## alingva (Aug 17, 2013)

FrugalTrader said:


> Franchises are a lot of hard work.


 Franchises that deal with food are "a lot of hard work" X2. Competition is enormous, margins are very small. That's why banks hate lending money to businesses related to food


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## donald (Apr 18, 2011)

Don't you have to pass with the franchiser more importantly?(i'am sure tim's and mcd run pretty tight standards to whom they are going to allow to fly their flag and be part of the eco system)Banks would be secondary i would of thought?
Mcd corp i would think has comb over every detail to make sure a store is going to be favorable(that's one of the benefits,i would assume to be a franchiser)
decades up decades of working a proven system 
I don't know!but i would of though credit would more likely come from them than a owner's local bank?Margins can't be that bad if you are dealing with the creme de la creme,if it's a shake and steak or something like that than yeah i could see there being way more problems.


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## newtothegame (Jan 2, 2014)

I'm sure there is money to be made running busy, well located franchises. However, look around! Things are becoming oversaturated, with not only competing franchises, but from the same franchise located within blocks of each other!

And it seems to me, that you can own a franchise, but you really do not own a business. Business owners have the freedom to set their pricing, among _many_ other things. It's almost like you're investing money into a franchise, only to become nothing more than an employee working on commission following strict rules from head office, while accepting risks that only an independent business owner is typically expected to deal with.


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## RBull (Jan 20, 2013)

Most small business people do not earn what many people would think, and also work a lot harder too. 

The franchises mentioned are into the high end of income opportunity and also are very expensive and difficult to enter. I've owned and sold a lesser known B2B franchise, and spent nearly 8 months researching opportunities and doing due diligence before moving on it. With a smaller operation in some ways it is buying yourself a job where you have full responsibility. You may have a fair amount of independence, but with a significant portion of net profit going back to the franchisor. 

In fact it is owning a business but has some similarities to commission only sales (which I have also been for many years). The big difference however is the buck stops here. You put up your money, make the decisions, pay your bills and then take what is left. Quite a difference from working for someone else. Some quality franchises offer good advantages for the franchisee and lots do not. Some franchises slip under the radar and are not just the bigger retail names some on here may be limited to think of. The rules for the franchise vary widely, but many have full decision on setting local pricing like I did. 

It can be a good decision for a suitable entrepreneurial person (but not too entrepreneurial) that also make a wise choice of franchise model.


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## tygrus (Mar 13, 2012)

I always thought franchisees would be making in the order of $400-500k a year. I mean all you have to do is count the customers paying 10-15 bucks per transaction all day long. Most are open 7 am until 11 pm, some are 24/7 now. Couple customers an hour and you have $1000 bucks a day minimum. But I guess a lot of that gets eaten up in fees and rent and wages and royalties.

Just for perspective, I own a 1200 ac grain farm and I can pull in between $150-200k with 3 months of work, one part time employee and have 100% control except for the weather. Also no customers.


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## donald (Apr 18, 2011)

Wow tygrus that seems like high profit margins!And low overhead(1 part time employee)
I ran a roofing company and we run for about 8 mths(6 days a week)and do about a half/mill but that is about 250 hrs a mth on jobs(4-6 men)x8.
I'm being rough with numbers but after i pay myself(80k)i am happy if i have another 50k left to go into the next year with.
I'm spending easily 330k+ for every 500k of work i do.
I personally don't think 250k income on a few million in revenue is that bad(unless of course maybe i am not doing something right,lol)


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## tygrus (Mar 13, 2012)

donald said:


> Wow tygrus that seems like high profit margins!And low overhead(1 part time employee)


Well the overhead is all in the machines. Agriculture already had its "hollowing out period" and can't really go further down. We have some neighbors farming 3000 acres with 2 or 3 people and a lot of iron. We already have GPS driving the equipment but an operator still "rides" along.


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## Eclectic12 (Oct 20, 2010)

tygrus said:


> I always thought franchisees would be making in the order of $400-500k a year. I mean all you have to do is count the customers paying 10-15 bucks per transaction all day long. Most are open 7 am until 11 pm, some are 24/7 now. Couple customers an hour and you have $1000 bucks a day minimum. But I guess a lot of that gets eaten up in fees and rent and wages and royalties ...


Yes ... then too, I see a lot of McD's and Tim's with only a couple of people surfing the web at maybe $3 for a couple of hours.

Rush times, on the other hand, can be crazy.


Then too, if one is not hands on and has hired a manager -that eats up money as well. If there's any sort of scamming by employees (from the owner on down). If it's not a popular shift and the usual employees get sick, there might be lost sales.


The way I've heard of similar money is either owning multiple locations and possibly owning in Sask. :chuncky:

Cheers


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## indexxx (Oct 31, 2011)

tygrus said:


> I always thought franchisees would be making in the order of $400-500k a year. I mean all you have to do is count the customers paying 10-15 bucks per transaction all day long. Most are open 7 am until 11 pm, some are 24/7 now. Couple customers an hour and you have $1000 bucks a day minimum. But I guess a lot of that gets eaten up in fees and rent and wages and royalties.
> 
> Just for perspective, I own a 1200 ac grain farm and I can pull in between $150-200k with 3 months of work, one part time employee and have 100% control except for the weather. Also no customers.


1- there are a massive amount of payouts to the head corporation, that come out of your profits.
2- you are not allowed to shop around for bargains on supplies; you have to stick to what they tell you to purchase
3- nobody who owns a restaurant 'sits around and counts the customers'- it's an incredible amount of hands-on work that eats your whole life for about 60+ hours a week (I currently run a venue with 400 person capacity and 25 employees), unless you hire a great manager and you remain totally hands-off, which of course comes out of your profits. You are always "putting out fires", everyone and their dog needs a piece of you all day, you have to deal with disinterested staff, monitor theft, keep up on massive paperwork with all the suppliers, payroll, accounts, etc etc etc


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## tygrus (Mar 13, 2012)

I think Tims is deceiving. You see that big line in the parking lot, but 90% are buying a $1 coffee and $1 donut. Then its pretty busy in the mid morning and mid aft, but there are a lot of elderly people and out of work people sitting in there.


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## richard (Jun 20, 2013)

You know who makes a lot of money? The gas station next to Tim Horton's. All those trucks and SUVs idling in the drive through...


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## Rusty O'Toole (Feb 1, 2012)

tygrus said:


> I always thought franchisees would be making in the order of $400-500k a year. I mean all you have to do is count the customers paying 10-15 bucks per transaction all day long. Most are open 7 am until 11 pm, some are 24/7 now. Couple customers an hour and you have $1000 bucks a day minimum. But I guess a lot of that gets eaten up in fees and rent and wages and royalties.
> 
> Just for perspective, I own a 1200 ac grain farm and I can pull in between $150-200k with 3 months of work, one part time employee and have 100% control except for the weather. Also no customers.


Sshh don't say that too loud. We are still promoting the myth of the poor downtrodden farmer, working 12 hour days 365 days a year for peanuts. If you aren't careful you will get the public against agricultural subsidies and then where will you be?


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## Rusty O'Toole (Feb 1, 2012)

By the way, nearly every business is a lot harder, takes more work, and more risk for less profit than the average person would believe.

The public just has no clue and that goes double for academics and government employees and politicians.


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## RBull (Jan 20, 2013)

tygrus said:


> I always thought franchisees would be making in the order of $400-500k a year. I mean all you have to do is count the customers paying 10-15 bucks per transaction all day long. Most are open 7 am until 11 pm, some are 24/7 now. Couple customers an hour and you have $1000 bucks a day minimum. * But I guess a lot of that gets eaten up in fees and rent and wages and royalties.*
> 
> Just for perspective, I own a 1200 ac grain farm and I can pull in between $150-200k with 3 months of work, one part time employee and have 100% control except for the weather. Also no customers.


Yes, like...most of it. You also seem to be focusing on only best known food franchises. 

Not sure what your machinery or the land acquisition costs are but you sound like you are truly blessed.


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## RBull (Jan 20, 2013)

Rusty O'Toole said:


> By the way, nearly every business is a lot harder, takes more work, and more risk for less profit than the average person would believe.
> 
> The public just has no clue and that goes double for academics and government employees and politicians.


Bingo. Give this man a cigar.


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## Just a Guy (Mar 27, 2012)

Rusty O'Toole said:


> The public just has no clue and that goes double for academics and government employees and politicians.


I have worked for government and I agree, it's hard to be than inefficient and waste that amount of time and money. It definitely wasn't for me. I like to be efficient and save money, I don't believe in work for welfare.

Tygrus,

I don't know how good your math is, and no one else seems to have pointed this out, but you projected a minimum of $1000/day...with 365 days, that only adds put to $365,000 in profits to go to the owner and franchise.


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## RBull (Jan 20, 2013)

^those were just projections for revenues, not profit.


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