Franchise ROI Calculator (Return and Payback Period)
Subtracts the annual royalty from the annual profit and compares the result with the investment to show the return percentage and the payback years.
Recent
Formula
How the calculation works
The tool subtracts the annual royalty from the annual profit to get the profit you actually keep each year.
It divides that net profit by the investment and multiplies by one hundred to return the return percentage.
It then divides the investment by the net profit to return how many years the franchise takes to pay back.
Common mistakes
- Ignoring the royalty, which comes off the top of profit and can cut a headline return by several percentage points.
- Comparing return with a bank deposit rate without allowing for the working capital a franchise also ties up.
When to use it
- Compare two franchise offers that ask for different investments and charge different royalty rates.
- Decide whether a franchise pays back within the loan period you are planning to take.
Worked example
An investment of 2000000 taka with an annual profit of 500000 and a royalty of 60000 gives a net profit of 440000, a return of 22 percent and a payback of 4.55 years.
Common questions
Should the royalty go into the return calculation?
Yes, the royalty is a real annual cost that reduces your profit, so leaving it out shows a better return than you really get.
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