- In a franchise, several costs rise automatically with sales: royalties, marketing levies, card fees and often delivery commissions.
- The useful measure isn’t sales growth but incremental profit: how much of each extra dollar you keep.
- Track gross margin, labour % and site contribution alongside sales, every month.
The pattern
A store’s sales are up on last year. The team is busier, the roster is fuller and the franchisor is pleased. Yet the bank balance hasn’t moved. This is one of the most common things franchise owners bring to an accountant, and it usually has a small number of causes.
Costs that grow with every sale
| Cost | Why it rises with sales |
|---|---|
| Royalties and marketing levies | Usually a percentage of gross sales |
| Cost of goods | More product sold, plus wastage if volume is uneven |
| Merchant and card fees | A percentage of card takings |
| Delivery platform commission | A large share of each delivery order |
| Labour | Longer trading hours and extra shifts, often at penalty rates |
Measure the profit you keep
Instead of asking “are sales up?”, ask: of every extra dollar of sales, how much reached site contribution (profit before shared costs)? Calculate it by comparing this period with the same period last year:
Incremental margin = change in site contribution ÷ change in sales
Where to look first
- Channel mix: compare margin on dine-in or in-store sales with delivery and online orders.
- Trading hours: look at sales and labour hour by hour. Quiet hours at penalty rates can lose money.
- Discounting and promotions: measure volume against margin given up.
- Purchasing and wastage: check that gross margin held as volume grew.
- Fees: reconcile royalties and levies to the agreement’s sales definition.
Make it a monthly habit
Put sales, gross margin %, labour %, fees and site contribution side by side every month, with last year’s figures next to them. When sales and contribution move apart, you’ll see it early. See also how to compare profitability across locations.
This article is general information for Australian franchise businesses. It doesn’t take your circumstances into account and isn’t personal tax, legal or financial advice.
Talk it through
Every franchise is different. Ask us how this applies to yours.
