What Does Average Income Mean?

A franchisor may list the average income of its franchises in Item 19 of the Franchise Disclosure Document (FDD) — Financial Performance Representations — to demonstrate their brand’s profitability to potential franchisees.

However, it is important to note that income varies greatly between business owners and that the average income listed in Item 19 may include exceptionally successful outliers.

Franchise Business Review reports that the average annual pre-tax income of franchise owners in America is $80,000. This average income may seem impressive, but it also may be deceiving. For example, Franchise Business Review reports that 7% of franchise owners make more than $250,000 annually, while 51% earn less than $50,000.

In other words, promoting an average figure can make a brand appear more successful than it really is, as a few successful franchises can inflate that average.

While a franchisor cannot predict or guarantee that a franchisee will make an exact income, the franchisor can provide helpful information in Item 19 of the FDD to help the franchisee make an informed decision.