How Much Do Franchise Owners Make?
Anyone who’s ever considered buying a franchise has probably asked this question to themself.
Given the amount of money certain franchises cost to get started (ahem, over a million dollars for some brands), naturally, people want to know what kind of return on investment they can make.
While it’s a totally fair question, the answer requires a ton of nuance.
Every Brand is Different
The word franchise refers just to a business model – one where a franchisor licenses their brand, operating expertise, and more, in exchange for royalties and franchise fees.
But the scope of different businesses that will use this model is very wide and includes companies in just about every industry imaginable, such as fitness, fast food, home services, real estate, B2B, pets, automotive, personal care, and more.
So as you can imagine, not only can the potential returns vary from industry to industry, but also from brand to brand. If you’ve been subscribed to The Wolf Report for a while, you’ve seen me break down a lot of different franchises, and thus, you’ve seen a variety of returns on investment.
Certain brands show the potential for well over six figures per location, while others are under $100,000. That individual analysis doesn’t include the upside potential if you were to ever sell your franchises, or the downside potential of your business not succeeding.
Overall, there’s no one-size-fits-all answer to this question.
If you Google this question, you’ll receive a wide range of answers from $50,000/year to $300,000+.
The reality is the brand you choose to own and operate makes the biggest difference and not only that – but how many locations do you plan to own?
Regardless of the franchise, owning 1 location offers a relatively low earning potential. Said another way, you’re not going to get rich owning just 1 franchise.
While there are a few exceptions to this, the vast majority of the 4,000+ franchises out there will not make you wealthy with a single location.
All the wealthy franchise owners I’ve met are multi-location owners of franchise brands typically emerging franchises.
You can listen to my various podcast conversations with multi-unit owners if you’d like to hear their experiences directly.
Owning multiple locations is how you can flip the script and generate far higher returns for yourself. By owning multiple franchises, not only should your annual EBITDA increase, but also the sale price of your businesses if you were to sell to an acquirer, as it’s typically done off of multiples of EBITDA or revenue.
Of course, not just anyone can become a multi-unit owner.
It requires a talented operator who has the patience to build multiple businesses, hire key staff members, and the means and savviness to finance each location via cash on hand, lenders, partners, etc.
But in the context of multi-unit ownership, when you then ask the question “how much money can you make owning a franchise?”, the answer can change quite dramatically.
Here’s a real-life example of what I mean:
Via multi-unit ownership, Guillermo Perales has turned a single SBA loan in 1997, into a billion-dollar holding company.
Guillermo was born in Mexico City and graduated college in Monterrey as a CPA. He got a job at a large Mexican food producer called Grupo Maseca, now known as Gruma.
He always wanted to own his own business one day, so he lived very tight to save his money.
In the late 1980s, Gruma transferred Perales to Dallas where he oversaw the acquisition of other food companies. This experience gave him the confidence to go off on his own.
Perales initially wanted to bring Golden Corral to his home country of Mexico in the early 1990s, but after the country’s economy collapsed, it was no longer a viable option for him.
Instead, he was able to negotiate with Golden Corral to open 5 locations in Dallas, where he’d eventually emigrate to live full-time. He didn’t have the money to open the first location, however, so he financed it via an SBA loan.
“Once we opened the other Golden Corrals, doors began to open with other brands”
Since the first Golden Corral in 1997, Perales has expanded aggressively by building new locations and buying existing ones for many brands.
Today, Sun Holdings (the name of Guillermo’s holding company), owns and operates 1,200+ franchises in 12 states, employs over 22,000 people, and generates over $1 billion dollars in annual revenue.
His portfolio includes:
- 206 Arby’s
- 169 Popeyes
- 131 Applebee’s
- 166 Papa John’s
- 115 Taco Bueno’s
- 141 Burger King‘s
And far more franchises.
As impressive as this is, remember that Guillermo hasn’t done this overnight. His journey started 25 years ago back in 1997.
And while not everyone has the chops to accomplish what he has, to me, this is the upside potential of multi-unit franchise ownership.
Guillermo Perales is a living example of how much you can make by owning franchises.
It’s not a get-rich-quick scheme, and it’s not going to happen quickly.
But patient and talented operators can make life-changing money via franchises.