How does a headquarter of a franchise get money?

Question

Think of all the Franchise in the world.

Burger King, Mcdonalds, Pizza Hut, Wal-Mart, Target, Belk, RadioShack.

Those are pretty big franchise.

But how does the headquarters of the Frachise get the money? Lets say a person who started one of the headquarters made more of Burger King or Belk all around the world, how would he get the profit? Does the stores around the world or nation give the headquarters or the person money? If not, tell me how they get rich?

And when I say money, I mean how they are rich.

Answer 1

They also pay a percentage of their profits

Answer 2

Its a partnership.  

If you want to sell hamburgers, you can open your own no name hamburger stand, and see what happens...  You will probably fail, or just barely make it.  Even if your burgers are good!

Or you can sell TONS of cheap yucky  hamburgers by taking a famous name like Mc whatever, so you sell WAY MORE !

In exchange for the Mc name, you agree to buy all your ingredients from them, pay them  a BIG franchise fee, pay them monthly fees, pay them a % of your gross profit etc.

This is how the headquarters earns their money.

You agree to sell only food they tell you to sell, and you agree to build your restaurant to their exact specs.

In exchange, your "hamburger stand" is recognized world wide, you get protected territories, TV and Radio ads, the choicest locations, financing, state of the art equipment, employee training, massive bulk discounts on supplies and all sorts of stuff you could never get if you tried it on your own.

Franchising is a very all American business concept that works well for both the franchisor and franchisee.

Answer 3

Lots of ways -

An initial buy in fee to use the name

An annual fee, sometimes a percentage of each sale

They often require the supply and initial set up purchases go through them (which they also make a cut on)

They make their revenue even if the franchisee is losing money.  I would much rather be the franchiser than the franchisee.  The franchisee puts up the $$ to open the location, takes the financial risk if things don't go well, does most of the work and isn't guaranteed any $$ if things go badly.

Answer 4

Franchisees pay a franchise fee to start up one of the operations, and then pay ongoing fees for the use of the name and the support.