Franchise unit economics from opening day to year three

Updated 16 October 2026

Unit economics is what one location sells, spends and keeps. Most guides describe a location at its average. This page follows one location through time instead, from the check written before opening to its third year of sales. The figures come from 2026 Franchise Disclosure Documents (FDDs). The FDD is the document a franchisor must give a buyer before a sale. Averan read the FDDs of 431 brands, and the library figures below are medians across the brands that report each line.

Before the doors open

Item 7 of the FDD lists the estimated cost to open one location, as a low and a high figure. It includes the initial franchise fee, the build-out, equipment, opening inventory, deposits and a reserve of working cash for the first months. Across 428 brands, the median cost to open runs from $164,981 to $327,686, and the median initial franchise fee is $50,000 across 427 brands.

The Item 7 total is spent before the first sale. A loan, the owner's savings or both cover it, and the loan payments start whether sales arrive on schedule or late.

Worked example: Hounds Town USA
Hounds Town USA, a dog daycare and boarding brand, lists a cost to open of $667,610 to $1,122,153 in its 2026 FDD. That includes a $49,000 initial franchise fee, which is 7.3% of the low estimate. The Hounds Town USA low estimate is 4.0 times the library median low of $164,981, and its high estimate is 3.4 times the library median high of $327,686.

Year one: fees start with the first sale

A royalty is the share of sales a franchisee pays the franchisor each week or month. The library median royalty is 6.50% across 417 brands. Most brands add a brand fund contribution, with a median of 2.00%, and a monthly technology fee, with a median of $388. Many also require a minimum spend on local advertising. These charges are set by the franchise agreement and do not wait for the location to reach its planned sales.

Worked example: Hounds Town USA in its first two years
Hounds Town USA locations open one to two years averaged $313,632 of sales in 2025. Hounds Town USA charges a 6% royalty, a 2% brand fund and a $440 monthly technology fee. At $313,632 of sales, that is $18,818 of royalty, $6,273 of brand fund and $5,280 of technology fee, a total of $30,371, or 9.7% of sales. Hounds Town USA also requires $5,000 a month of local advertising in months 4 to 12, which its page puts at 19.1% of what those young locations average.

Year two: costs run at full size on partial sales

Rent is fixed by the lease from the first month. Staff must be on the schedule whether a class or a room is full or half full. In year two a location carries most of its mature cost on sales that are still climbing, so its margin sits well below the brand's average. EBITDA, profit before interest, taxes, depreciation and amortization, is the usual way to compare that margin. The library median profit margin, as each FDD defines it, is 20.90% across 114 brands that publish one. Among the 31 brands whose FDD names the figure EBITDA, the median EBITDA margin is 21.80%.

Worked example: Goldfish Swim School
Goldfish Swim School's 2026 FDD sets 17 schools open 13 to 24 months against all 169 schools open at least 12 months. The young Goldfish schools averaged $1,534,009 of sales and $271,835 of profit before other expenses, a 17.7% margin. The full group averaged $1,994,169 and $560,524, a 28.1% margin. The young schools bill 77% of the full group's sales and earn 48% of its profit. Goldfish young schools pay $230,402 of rent against $226,663, so the $460,160 of missing sales costs $288,689 of profit.

Year three: the climb continues

Item 19 of the FDD is the financial performance representation, the section where a brand may publish sales or profit for its locations. Some brands split Item 19 by how long each location has been open. That split is the closest thing to a ramp a buyer can read, because it shows what locations of each age sold in the same year.

Worked example: Hounds Town USA by age
Hounds Town USA groups its 2025 sales by years open. Locations open one to two years averaged $313,632. Locations open two to three years averaged $420,811, which is $107,179 more. Locations open three to five years averaged $609,310, and those open five years or more averaged $842,716. A Hounds Town USA location in its third year sells 49.9% of what the five-year group sells. Hounds Town USA's page attributes nine tenths of that climb to more visits and one tenth to a higher average check.

Reading the brand average against one location

An Item 19 average blends young and mature locations, large and small ones. At the median brand in the library, the middle location sells 85.5% of the average, across 303 brands that publish both figures. At the median brand, 38.00% of locations reach the average, across 258 brands. A new owner plans against the median and against the age group the location will sit in during each year.

Worked example: Hounds Town USA's average and median
Hounds Town USA reports an average of $520,855 and a median of $485,743 across its franchised locations. The median is $35,112 below the average, or 93.3% of it. A Hounds Town USA location in its second year, at $313,632, sits $172,111 below that median. The average describes a mix of locations at every age.

Payback once the location matures

Payback is the number of years of profit it takes to recover the cost to open. It uses profit before loan payments and income tax, and it assumes the profit of a mature location. The early years earn less, so actual payback runs longer than the simple division shows.

Worked example: Hounds Town USA payback
Hounds Town USA reports full statements for 29 locations open three full years or more under the same owner. They averaged $722,816 of sales and $152,070 of net operating income, 21.0% of sales. Against the Hounds Town USA cost to open of $667,610 to $1,122,153, payback at that mature profit runs from 4.4 to 7.4 years. The first two or three years earn less than $152,070, so the real figure is longer.

What this means for an owner

A location pays its full cost to open before its first sale and pays fees from that first sale. Fees at the median brand take 9.00% of sales, and minimums or fixed monthly charges take a larger share in year one. In year two, rent and wages sit at mature levels while sales are still climbing, so the margin trails the brand average. Plan each year against the sales of locations at the same age, and calculate payback on mature profit with the early years added on.

Check one location

The Franchise Numbers Check is a free tool on this site. It takes one location's figures and sets them against the brand data Averan has published. Each of the 431 brand pages in the Averan Franchise library shows that brand's own figures, including the Hounds Town USA and Goldfish Swim School pages used here.

Also worth reading

If you want this done for you

What happens next

Reading about it and having it done are different things. Here is exactly what happens if you want the second one.

The call takes thirty minutesYou describe the business and where the numbers are letting you down. We give you an expert view of your situation, and what we would start with. There is no pitch deck.
We look at the fileYou give us read access to the books as they are. We come back with what is wrong, what it will take to fix, and whether the answer is bookkeeping, controller work, or something else.
We send a written scope and a priceIt lists what we do each month, what you get, the date it lands and the fee. We agree it before anything starts, and it does not change unless you agree.
We take over the books and close the first monthWe set up access and systems and enter the opening balances. The first close lands on the date in the scope, and every one after it does too.

Start with the call →How an engagement runs