For business owners who want to run their own company but don’t want to start from scratch, buying a franchise might be a lucrative opportunity. Franchisees profit from a tested business strategy, well-known brand, and continued assistance from the franchisor. However, how are franchise owners compensated? Let’s look more closely.
Sales of goods or services and royalties to the franchisor are traditionally the two main sources of income for franchise owners. The selling of products or services is a franchise owner’s main source of income. This covers all transactions, from the purchase of meals and drinks at a restaurant to the purchase of apparel and accessories in a retail establishment. These products are often marked up and sold to customers at a higher price by franchise owners who buy them from the franchisor or an authorized supplier.
Franchisees also pay royalties to the franchisor in addition to selling goods or services. The typical range of royalties is between 4% and 8% of the franchisee’s gross revenue. In exchange for the use of the franchisor’s name, trademarks, and business systems, these royalties are paid to the franchisor. Royalties are frequently based on gross sales and are typically given on a regular schedule, such as weekly or monthly.
The franchisor may also demand payment from franchisees for additional costs, such as an initial franchise fee or continuing marketing costs. Depending on the franchise system, these costs may be paid up front or on an ongoing basis and might vary greatly.
Who owns BP, exactly?
BP, previously British Petroleum, is a global oil and gas corporation with headquarters in London, United Kingdom. BP is a publicly listed business that is owned by its shareholders rather than a franchise. BP’s top stakeholder as of 2021 is the American financial management firm BlackRock.
ExxonMobil, a global oil and gas corporation with headquarters in the United States, owns the Esso brand. Esso is not a franchise in and of itself, though ExxonMobil does provide franchise options for its convenience store and gas station businesses. ExxonMobil or one of its affiliates owns and operates Esso stations.