Which “Pays” More- A Corporate Job or a Franchise?
Have you ever wondered whether a corporate job “pays” more than becoming a franchisee? Let’s compare the two career paths and see which one is more lucrative.
The key difference between a job and franchise ownership is that a job requires no upfront investment. Conversely, owning a franchise requires an initial investment. Hopefully, your franchise business would become profitable quickly. When your business is generating enough cash, you can either pay yourself or invest in the business. As the franchise grows, you would be able to increase your salary.
When franchisees first generate profits, they usually pay themselves a small salary and invest the remainder into the business. As the franchise grows, they hope to pay themselves a salary much greater than a corporate salary. In an ideal situation, they earn a salary greater than a corporate salary and also own a valuable asset. Let’s compare earnings from 5 years as a corporate executive and a franchise owner.
Corporate Executive Earnings
The following are hypothetical salaries as a Corporate Executive:
Year 1: $100,000
Year 2: $103,000
Year 3: $105,000
Year 4: $110,000
Year 5: $115,000
Total Salary Earned- $533,000
Franchise Owner Earnings
The following are hypothetical salaries as a Franchise Owner:
Year 1: $0
Year 2: $50,000
Year 3: $80,000
Year 4: $120,000
Year 5: $150,000
Total Salary Earned- $400,000
A corporate job would generate $533,000 over 5 years. Owning a franchise would generate $400,000 over the same period. At first glance, a corporate job appears more profitable than owning a franchise. This is false.
The big advantage of franchise ownership over a corporate job is that franchise owners are able to build equity. For example, let’s say that the franchise business is worth $300,000 after 5 years. This would increase the total 5 year return for the franchise to $700,000. This is significantly higher than the $533,000 generated as an employee.
5 years in Corporate America includes steady income from day 1 with annual raises. Owning a franchise over a 5 year period starts slow and requires upfront capital. After a few years of hard work, it can generate more income. The business also is an asset that will continue to rise in value. Overall owning a franchise empowers candidates by allowing them to take control of their lives and giving them the freedom and security they need to live a financially stable life.