image How Do Franchise Owners Get Paid? 

How Do Franchise Owners Get Paid? 

No matter what business you’re in, you probably want to know when and how your next paycheck is coming. Keeping the cash flow coming into the business ensures that you can continue operating your business, stay profitable and pay yourself out of those profits. If you’re considering opening a branch of an existing business, you may have wondered, “How do insurance franchise owners get paid?” How do finances and payments work when operating as a franchisee? 

Understanding How Insurance Franchise Systems Operate 

Insurance franchise systems provide investors or business-minded individuals like you with the opportunity to open a branch using a recognized brand. Not only do you get access to the company name as a franchisee, but also the infrastructure, training, and advertising that comes with an established business. 

The business selling the rights to open a branch is the franchisor. The franchisor also benefits from selling their brand and infrastructure, because they get expanded market reach and brand name recognition through your new office. Both parties can realize more success and profitability. 

It’s vital to have a good relationship and strong communication between both parties. Collaboration between the franchisor and franchisees is essential to maintaining the brand image, adhering to industry standards, and dealing with the financial aspects of franchises. 

The Financial Framework for Insurance Franchise Owners 

When you enter into a franchise agreement, you and the franchisor must establish a financial framework before finalizing the contract. This guides the financial and legal factors so it is a profitable arrangement. There are many things you need to know about franchising agreements, but what’s pertinent here is that this document outlines all the financial details and terms between the insurance franchise owners and the franchisor. It also addresses the question, “How do franchise owners get paid?” This legal document is binding, so you will know upfront what to expect as a franchisee. 

If you’re franchising with an established business, they’ll likely have a set framework that you can expect to work within. This usually outlines start-up costs, royalties, and other fees. 

Start-Up Fees 

When opening an insurance franchise, you must pay start-up fees. This fee is a one-time payment you will make to the insurance franchisor. It covers the cost of utilizing the franchisor’s brand, materials, training, systems, and support. Other items may be included in this start-up fee, so be sure to read the franchise agreement closely. 

Start-up fees vary from place to place. Check to determine what the cost is and how much you can expect to receive in profits. That way, you can make an educated decision about what to do. If you don’t have the liquidity on hand to cover these costs, you may also be able to get a small business loan to help you open your franchise

Royalty Fees 

As a business investor, you want to know, “Do franchise owners make money,” and “How do franchise owners get paid?” These questions are relevant to your success and profitability. Just as with any other business venture, you must consider the money flowing in and the expenses going out to get an idea of your income. Franchises are no different in that regard. 

When you open an insurance branch with a franchisor, there is an expense called royalties that’s unique to franchisees, as opposed to someone who opens a business from scratch — you will always have to pay the franchisor a certain amount of your profits on a regular basis. The two parties will work out a structure for payments as well as a time frame in which the royalty fees are due. 

Percent vs. Fixed Fees 

As stated above, franchise owners and franchisors will establish an agreement on the amount of royalties that the owner will pay. Each franchisor has their preferred method, but two common ways that fees are paid are as follows. 


These fees are based on a certain percentage of the total gross sales. The rate is commonly between 5% and 9%, but the exact rate can be determined beforehand. If a franchise’s total monthly gross sales income was $10,000 and the contract states that you must pay a 7% royalty fee, then the cost for that month would equal $700. 


These fees are already predetermined and are paid at regularly timed intervals, such as monthly, quarterly, or annually. For example, the agreement may state that as the franchisee, you must pay a flat fee of $500 per month. A fixed fee may be more than a percentage of gross income. 

One myth about opening a franchise to keep in mind is that, despite these fees, franchising doesn’t need to be super expensive. If you’re interested, speak with the franchisor to get a better idea of the total costs involved. 

Businessman seen from behind looking at pie charts on his laptop.

Revenue Streams for Insurance Franchise Owners 

The insurance industry has several revenue streams that apply to franchise owners. The primary source of your revenue as an insurance franchise owner is premiums, which are the monthly amount customers pay for their policy. Your franchise may also charge fees for various administrative duties, including processing fees, late fees, and so on. 

Your branch likely has the option of offering ancillary products or services to your customers, such as roadside assistance, which allows your agents to upsell. This will depend on the brand you’re franchising. 

Underwriting profits may be another revenue stream for your franchise. When an insurance branch has effective underwriting, it can bring in added income because of the difference between premiums received and claims paid out. 

Lastly, you can consider investing premiums in money-making ventures. Just be sure to invest wisely and avoid common franchise management mistakes

Managing Expenses to Maximize Profits 

In order to maximize profits while operating an insurance franchise, you’ll need to evaluate the revenue and expenses. You will want the premiums and other revenue streams to be greater than your costs. To evaluate your bottom line, it’s important to understand how to calculate your net income. 

Calculate your total revenue, including all income streams. Subtract your business’s expenses and operating costs from your total revenue. Don’t forget to add the royalty fees to your expenses. This gives you the amount before taxes. Once you deduct taxes from that amount, you will have your business’s net income. You can examine this calculation, especially any variable costs, to determine how to reduce expenses or increase revenue to boost your bottom line. 

There are a variety of expenses that you may incur when running an insurance franchise. Overhead costs like salaries, taxes, rent, and office supplies are very common. Additional expenses typically include royalty fees, debt, and depreciation. You’ll also need to spend money to market and advertise your business, and to educate and train your employees. Figuring out how to pay yourself as a business owner is another big part.  

However, operating an insurance franchise, as opposed to starting your own brand, can save you some money because you will have the support of the parent company. Also, because the brand is established and already has brand recognition, you won’t need to spend as much on advertising or marketing costs. Additionally, some franchising opportunities offer ongoing training for employees, which can save you substantially. 

The important thing to do when considering an insurance franchise opportunity is to work with a reputable brand that provides plenty of perks to help keep your costs down. Then, you can expect to maximize profits. Some owners bring in over $200,000 annually. 

Ready to Start? Become an Insurance Franchise Owner 

Now that you know more about how insurance franchise owners get paid, you can get better information about whether starting a franchise is worth it. At Confie, we have top-quality insurance franchises for interested parties. You can count on partnering with one of the best insurance lines companies in the United States when you work with Confie. Our business offers top-of-line products and services. Our well-known brand name is sure to result in maximized profits for your business investment. 

We have multiple franchising and acquisition opportunities, careers, and more. Ask someone on our leadership team about any of these topics and more today. You can contact us online today or call us at (714) 252-2500 to discuss our products and services.