Franchise

Commission in the Franchise Industry

The franchise industry covers everything from fast food and retail to service businesses and B2B. Commission in franchising operates on two levels: selling new franchise units and ongoing sales within the franchise system.

Commission models vary significantly between franchisors (those selling franchises) and franchisees (those operating the units).

Commission for Franchise Sales

OTE for Franchise Roles

On-Target Earnings in the franchise industry:

• Franchise Development Director: $130,000-215,000 annually
• Franchise Developer: $95,000-145,000 annually
• Area Manager with Sales Responsibility: $80,000-115,000 annually
• Franchise Sales Manager: $72,000-110,000 annually

Commission Within Franchise Units

Within franchise units, commission often follows industry standards:

• Retail franchise: 1-5% of sales for store managers with sales targets
• Service franchise: 5-15% of sold services
• B2B franchise: 8-20% of new customer value
• Food franchise: Rarely commission, more often performance bonuses

Special Elements

The franchise industry has several unique commission aspects:

• Long sales processes: Selling franchise units often takes 3-12 months
• Due diligence: Many interested parties don't make it through qualification
• Territory protection: Commission only on sales in assigned territory
• Ongoing royalties: Some models include a share of royalties

For multi-unit deals, tiered commission is often used with reduced rates for subsequent units.

FAQ About Franchise Commission

When is commission paid on franchise sales?

Typically upon contract signing or when the franchise fee is received. Some companies distribute commission over milestones (signing, training, opening).

Do you earn commission on royalties?

It's rare, but some franchisors offer a share of first year royalties as extra incentive for finding quality franchisees.

What happens if a franchisee fails?

Clawback clauses are common. If a franchisee closes within 12-24 months, commission may be recalled in full or partially.