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As chain restaurants expand, they have two basic options when it comes to fueling expansion: they can either finance the establishment of additional locations on their own, or they can sell their brand through a franchise model, allowing entrepreneurs to pay fees to use their brand and business model. When entrepreneurs successfully take advantage of these opportunities, they may enjoy substantial personal earnings.
Profit vs. Salary
The owner of a franchise restaurant does not technically receive a salary, as a salary is a predetermined amount of money that an employer pays an employee. The money that a franchise restaurant owner receives from his business is its net profit, or the difference between revenue and all costs. For this reason, the actual earnings of a franchise restaurant owner fluctuate from one year to another. Owners may maximize earnings by cutting costs while boosting total restaurant revenue.
Franchise Profitability Information
Finding profitability statistics for franchise restaurant chains is difficult for various reasons. First, franchise owners tend to prefer not to share their profit figures with the public. Second, the Federal Trade Commission places a number of limitations on how franchisors can promulgate or circulate franchise profit information. However, some franchisors do try to make such information available in whatever way they can. Such franchisors tend to do this specifically because their franchise opportunities tend to be profitable.
The largest and most successful franchise restaurant chain in the world is McDonald's Corporation. For 2008, HGExperts.com reports that the average revenue for U.S.-based McDonald's franchises, excluding those that had opened that year, was $2,311,000. The location with the highest revenue brought in $9,552,000 for the year, while the location with the lowest revenue brought in $491,000.
Just as the total revenue for a franchise restaurant varies from location to location, so does the profit margin. Owners who effectively manage their operations and accountancy tend to earn higher profits than those who do not, even when their total revenues are the same. According to Franchise Pundit, the industry standard for successful franchise restaurant owners is a profit margin of at least 10 percent. Thus, with an average of $2,311,000 in sales for 2008, a sensible projection would be that the owners of established McDonald's franchises earned an average of $231,100 per location in 2008.