Paying yourself from a franchise: owner's wage, break-even and the first year

• Break-even sales = fixed costs ÷ contribution margin, where the contribution margin is your gross margin minus the royalty and marketing percentages.
• Illustrative: with $18,000 of monthly fixed costs and a 52% contribution margin, break-even is about $34,615 of sales a month before you're paid anything.
• Paying yourself $6,000 a month lifts the target to about $46,154 of sales a month.
• Royalties, levies and interest payments can be based on turnover rather than profit, so they're payable in loss-making months (ACCC).
• A sole trader is taxed on business income, not on what they withdraw; a company can pay you a wage, director's fees or dividends (ATO).
• A franchisor's projection must say whether it includes a salary for the franchisee. Check before you rely on it.

Separating the two shows whether you're buying a good business or just a job.

• Owner's wage: what it would cost to employ someone to do your job. If you work 50 hours a week in the business, that labour has a market value.
• Profit: what's left after all costs, including a fair wage for your labour. It's your return on the money you invested.
• If the business only makes money when you work unpaid hours, it has no real profit, just a low wage.
• Compare the expected profit with the risk you're taking and with what your capital could earn elsewhere.
• The ACCC's information statement asks whether you'll make enough money to pay yourself as well as any staff, and warns that labour costs can be hard to estimate.
• Under the Franchising Code, a projection in the disclosure document must state whether it includes a salary for the franchisee, depreciation and the cost of servicing loans.
• When you compare systems, adjust every forecast so it includes the same owner's wage.

1. List your monthly fixed cash costs: rent, staff wages (not yours), insurance, software and any fixed franchise fees, utilities and loan repayments.
2. Find your gross margin: the share of each sale left after the direct cost of the goods or service.
3. Subtract the royalty and marketing percentages charged on sales to get your contribution margin.
4. Divide your fixed costs by the contribution margin to get break-even sales.
5. Add your target wage to fixed costs and divide again to find the sales needed to pay you.
6. Compare both figures with what current franchisees actually achieve, not just the franchisor's projection.

Every figure below is an assumption for illustration, not a benchmark for any franchise or category.

• Fixed cash costs: $18,000 a month, covering rent, staff wages, insurance and loan repayments, but no wage for you.
• Gross margin: 60%. Royalty: 6% of sales. Marketing levy: 2% of sales.
• Contribution margin: 60% minus 6% minus 2% leaves 52 cents of each sales dollar.
• Break-even: $18,000 ÷ 0.52 is about $34,615 of sales a month, or about $415,385 a year.
• With a $6,000 monthly wage for you: $24,000 ÷ 0.52 is about $46,154 a month, or about $553,846 a year.
• Paying yourself $6,000 a month therefore needs about $11,538 more in monthly sales than bare break-even.

The franchise break-even calculator runs the same sums with your own costs, margin and fees.

New franchises take time to build sales. This illustrative ramp-up uses the same assumptions, with sales of $20,000 in month 1 growing by $3,000 a month.

1. Month 1: $20,000 of sales produces $10,400 of contribution against $18,000 of fixed costs, a $7,600 shortfall.
2. Months 2 to 5: the monthly shortfall shrinks, but the business's cumulative gap grows to about $22,400 by month 5.
3. Month 6: sales of $35,000 cover the fixed costs with $200 to spare.
4. Month 10: the business first earns more than $6,000 above its fixed costs ($6,440), enough to start paying your target wage.
5. Until then, you live on savings. At an assumed $5,000 a month, that's $45,000 over 9 months.
6. Your combined cash need peaks in month 9 at about $57,240: the business's remaining $12,240 shortfall plus $45,000 of living costs, before any contingency.

Real ramp-ups vary widely. Ask current franchisees how long theirs took, and add a margin for a slower start than planned.

The ATO sets out the key obligations for each business structure. Your accountant can tell you which suits your situation.

• Sole trader: you pay tax on all your business income at your individual rate, however much you transfer to your personal account. You can't employ yourself, and money you take for personal use isn't a deduction.
• Partnership: partners aren't employees of the partnership. Each partner pays tax on their share of the net partnership income, and money you withdraw isn't a wage.
• Company: the company owns the money it earns. It can pay you a salary, wages or director's fees, which are assessable to you and generally deductible to the company if it meets its PAYG withholding obligations.
• Dividends: a company can distribute profits to shareholders as dividends, possibly with franking credits, but it can't claim a deduction for them.
• Company loans: money or other benefits a private company gives a shareholder, including loans, can be treated as a dividend under Division 7A, and a deemed dividend is generally unfranked.
• Trust: the trustee should document each beneficiary's share of the trust's net income in a resolution by the end of the income year, under the trust deed.
• GST: you must register once your annual GST turnover reaches $75,000.

• Pay yourself a fixed, modest draw or wage rather than taking cash as it comes in.
• Set aside GST, PAYG withholding and income tax in a separate account as you go.
• Budget for super on every pay run. The super guarantee rate is 12%, and from 1 July 2026 contributions must reach employees' super funds within 7 business days of payday.
• If you trade through a company, you count too: it must pay super guarantee for eligible workers, including directors.
• Keep records of anything you take out of the business, as the ATO requires, and keep personal and business spending separate.
• Review actual results against break-even every month, and lift your pay only once your cash reserve is rebuilt.

• I know the franchise's fixed costs, gross margin and fee percentages.
• I've calculated break-even and the sales needed to pay my target wage.
• I've compared those figures with what current franchisees achieve.
• I've checked whether the franchisor's projection includes a salary for me and loan costs.
• I have savings to cover my living costs until the business can pay me.
• I've chosen a business structure with my accountant and understand how I'll be paid.
• I've budgeted for super, GST and tax from the first month.