How Fortunes are Made
Royalty Income
Example:
Assume you purchased a territory from a franchise company at a pre-determined amount.
Your agreement with the franchisor is that you would receive 50% of each franchise fee and 50% of the royalty income.
Let’s assume that the franchise fee is $45,000 per unit and the royalty each unit pays is 6% of their gross sales. That means for each unit opened in your territory you would receive $22,500 (50% of the $45,000 franchise fee).
Let’s also assume that each unit opened in your territory has an average yearly gross sales volume of $1,000,000.
Each unit would pay a royalty of 6% of their gross sales, which is $60,000 per year.
You as the Master Franchisee would receive 50% of this amount which is $30,000 per unit per year.
If 10 to 100 units opened in your territory, your royalty income would be $300,000 to $3,000,000 per year.
Franchise Fee Income
In the explanation above if you received 50% of the franchise fee from each franchise unit sold in your Master Franchise territory you would have received an additional franchise fee income of $225,000 to $2,250,000.
Your income from franchise fees and royalties may be very substantial and could provide a lifetime income for you and your heirs.
(This example is for explanation purposes only and not a guarantee)
Building Equity
Once franchise units open in a Master Franchise territory, it can significantly increase the value of the Master Franchise. Also as other units open in other territories and the Franchise Company grows, a territory may become very valuable because others may wish to acquire it and could be sold for a considerable profit.