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Sunday 20 April 2014

How much do the Franchisees of Top F&B firms actually make: Subway and McDonald's

Many of the world's largest firms, be it food and beverage, or retail, sell franchising rights of their business. What better could it be for them? People are paying them to expand for them! And the franchisee is earning the money from a well established brand. If someone has the money to buy a McDonald's franchise, they, on estimate, normally pull around 10% of the profits for themselves, out of an average of $2.3 Million. Yes, it depends on the location and the size and the customers, however this was a ballpark average, and is quite a round number. Now we just do the math! So that is around $230,000, near quarter of a million each year. That is quite a decent income, given you own one McDonald's! On an investment of a minimum of $1.3 Million, the owner himself is making $230,000.
Let's look at a considerably cheaper example - Subway. The minimum you pay for a Subway franchise is around $80K.  Experienced franchisees of the Sandwich Multinational say they can pull around 18% to 25% of the revenue a year. Given that the average store makes around $400K a year, an owner can make anywhere from $72K to $100K a year on an initial investment of around $80K to $100K. That is again quite a reasonable income. 
However these figures do not apply to everywhere, as it depends largely on the potential customers and location! A man opening the first Subway in one of the busiest areas in the city may manage $600K a year, more than someone opening one in a busy area, but with another subway or sandwich shop around.
Of course, out of this money, the owner(s) must pay for new stock, their royalty fee, any loans, and many other costs incurred by running a franchise!

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