Franchise Gross Profit Or Net Profit?

5 May 2004

Business Opportunities Weblog (via others) is running a table that shows how much some franchises earn. I may be misreading the table and the paragraph that precedes it. That paragraph seems to be telling me that the last column in the table is the gross profit that each franchise makes.

I think of gross profit as the different between sales and cost of goods sold. From gross profit, businesses subtract all other expenses associated with running the business. The table shows annual figures. Don’t be deceived by a sales figure of $1.3 million followed by a ”profit” figure of $916,000. It costs a lot more to run a McDonald’s than the difference between those two figures.

The table is still worthwhile. You get a good idea of how to view the financial structure of some businesses with which we’re all familiar.

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