Saturday November 7, 2009
WHEN IT COMES TO making money in franchising, the focus usually is on what franchisees can pocket. Seldom is there discussion about the pay of those on the other side of the contract -- the franchisers.
Partly, that's because franchising firms aren't required to disclose managerial-staff salary information. Even if they're publicly traded, only very senior compensation, such as that for chief executive and chief financial officers, is published.
But in recent months, FranData Inc., a franchise-information firm in Arlington, Va., asked franchisers to see their payroll numbers, responding to requests from some franchisers about industry compensation rates.
Foreseeing a difficult year, franchisers were increasingly looking at their expenses, says FranData President and CEO Darrell Johnson. "They were asking, 'What, for example, does it cost us to hire a franchise-development person?'" Such specialists oversee efforts to attract new franchisees to a brand and, thus, are key to revenue growth. In the past, franchisers had relied largely on "hearsay and back-alley information" in setting pay levels, he says.
The result of the FranData survey is what's believed to be a first-ever glimpse at how rewarding work at franchising companies can be. Executives and personnel departments at franchisers across the country are likely to study the results to see how their pay structures compare, as well as how their individual paychecks stack up against their peers.
The survey covered seven job functions: site selection, marketing, franchise development, training, field operations, legal and compliance. All told, 87 franchisers representing 109 brands -- including auto repair, computer products, real estate and fast food -- responded. Results were compiled by Akron Inc., a data and survey firm in Washington, D.C.
The best-paying managerial jobs were in the full-service restaurant industry, the lowest-paying in retail products and services. Managers in food-related franchises in general tend to be paid more than those in other fields, a differential Mr. Johnson attributes to "the more complex nature of food-handling businesses."
FranData also found that franchisers with more than 500 units have the highest base pay.
By specialty, the highest-paid managers were those running legal departments or overseeing site selection for a franchise's outlets. The average annual pay of a franchiser general counsel, excluding benefits, was $131,222 for the 12 months ended July 1. The average pay for someone managing site-selection and pre-opening activities was $130,690.
Next came managers of field operations, those charged with making sure franchised businesses are working properly and dealing with daily issues that franchisees face. Average annual salary for that post was $111,407.
Managers of franchise development rank fourth, with average annual salary of $109,523, followed by those directing marketing efforts, at $106,308.
After that, there's a big pay gap. Managers of franchisee training averaged $79,300 in annual salary, the survey found. The lowest-paid managers by function, at $72,968, were those in charge of compliance -- making sure that franchisees carry out their contractual obligations. In a restaurant chain, that could mean whether operators are hewing to local health and cleanliness ordinances, and making sure employees' work papers are in order.
Write to Richard Gibson at dick.gibson@dowjones.com