To apply for a hard-to-get franchise requires $1.5 million in net worth and $500,000 in liquid assets. The franchise fee is $50,000 and in addition there’s a cash requirement of between $430,000 and $480,000, plus tax. Then you need another $50,000 in working capital.
Of gross sales, which average about $1.5 million a year for an established location, there’s a 4.5% weekly royalty fee, a monthly rental fee average 8.5% of sales (the real estate is owned by the company, not the franchisee) and a monthly marketing fee of 4%. In other words, about a fifth of all revenue goes to head office. Then you start paying regular operating expenses, including ingredients and supplies – which must be purchased from the franchisor at prices which it sets, controls and increases at will. Labour is a giant component, which is why the wage increase has caused an uproar.
The bottom line is that of $1.5 million in gross sales, the net is between $175,000 and $300,000, which is taxable income. To earn that, the franchisee invests a lot of money but doesn’t actually own anything, since the 10-year Tim’s license can be revoked or not renewed. Meanwhile, of course, he has to run a fast-food restaurant which is likely open 18 or 24 hours a day, make grumpy customers happy, clean the bathrooms and find enough employees to keep the doors open.
Glam, it ain’t. But Tim’s operators are the rich ones in an industry where 51% of all restaurant owners make less than $50,000 – sometimes employing wait staff earning more than that in tips.
