Restaurant & Retail Operations, Multi-Unit Franchising & Unit Economics
QSR Franchise Royalty, Four-Wall EBITDA & Cash-on-Cash Formula
Calculate Quick-Service Restaurant (QSR) Franchise Gross-Sales Royalty + National Brand Ad-Fund Assessment ($), Net Franchisee Four-Wall EBITDA ($), Unlevered Buildout Cash-on-Cash Return, and Simple Capex Payback Period (Years).
Remember that franchise royalties come off GROSS sales—amplifying Prime-Cost margin squeezes!
Prospective multi-unit Quick-Service Restaurant (QSR) and fast-casual franchisees analyzing Item 19 of a Franchise Disclosure Document (FDD) often benchmark company-owned store EBITDA without subtracting top-line Franchise Royalties (5%–7% of Gross Sales) plus National Brand Ad-Fund Fees (1.5%–3% of Gross Sales)! Because Franchisor_Take = Gross_Sales * (Royalty_Rate + AdFund_Rate) is assessed on GROSS revenue regardless of food or wage inflation, Net Franchisee Four-Wall EBITDA = Gross_Sales * (1 - Prime_Cost_Pct - Royalty_Rate - AdFund_Rate) - Fixed_Occupancy_&_Opex absorbs 100% of Prime Cost (COGS + Labor) volatility!
Verify on a Drive-Thru QSR Buildout—Average_Unit_Volume_Sales = $1,800,000/yr (B2), Prime_Cost_Food_Plus_Labor = 0.58 (58.0%, B3), Fixed_Rent_Utilities_Opex = $216,000/yr (B4), Franchise_Royalty_Rate = 0.06 (6.0%, B5), National_Ad_Fund_Rate = 0.02 (2.0%, B6 -> Combined Top-Line Franchise Assessment = 1,800,000 * 0.08 = $144,000/yr in E2), and Total_Turnkey_Buildout_Capex = $990,000 (B7): Net Franchisee Four-Wall EBITDA equals $396,000/yr (22.0% margin in E3), delivering an Unlevered Cash-on-Cash Return of 396,000 / 990,000 = 0.4000 (40.00% in E4) and a 2.50-year simple payback (E5)!
| QSR Franchise Unit Metric ($1.8M AUV, 58% Prime, $216k Fixed, 6%+2% Fees, $990k Capex) | Formula | Verified Output |
|---|---|---|
| Annual Royalty + Ad Fund ($) | Gross_Sales * (Royalty_Pct + AdFund_Pct) | $144,000 (Unchanged @ 65% Prime!) |
| Net Franchisee 4-Wall EBITDA ($) | Sales*(1 - Prime - Roy - Ad) - Fixed_Opex | $396,000 ($270,000 @ 65% Prime) |
| Unlevered Cash-on-Cash Return | Net_Franchisee_EBITDA / Buildout_Capex | 0.4000 (0.2727 @ 65% Prime) |
| Simple Buildout Payback (yr) | Buildout_Capex / Net_Franchisee_EBITDA | 2.50 yr (3.67 yr @ 65% Prime) |
Franchisee Net Four-Wall Cash-on-Cash Return Formula
Validate Gross_Sales > 0, Prime_Cost in (0, 0.90), Fixed_Opex >= 0, non-negative Royalty and Ad-Fund rates, Buildout_Capex > 0, and strictly positive Net Four-Wall EBITDA!
=LET(au_v, B2, pr_c, B3, fx_o, B4, ry_r, B5, ad_r, B6, cx_b, B7, eb_f, au_v * (1 - pr_c - ry_r - ad_r) - fx_o, IF(OR(au_v <= 0, pr_c <= 0, pr_c >= 0.9, fx_o < 0, ry_r < 0, ad_r < 0, cx_b <= 0, eb_f <= 0), "Invalid Franchise Unit Model", ROUND(eb_f / cx_b, 4)))Beef & Wage Prime-Cost Inflation Check (Set Prime Cost = 65.0%)
Raise Prime_Cost_Pct B3 from 58.0% to 65.0%: the franchisor still collects $144,000 top-line fees (E2), compressing Franchisee Net EBITDA E3 by 31.8% to $270,000, cutting Cash-on-Cash E4 to 27.27% (0.2727), and stretching Payback E5 from 2.50 years to 3.67 years!
=IF(ISTEXT(E4), E4, ROUND(B7 / E3, 2))Try the example
Use the original values or change them to test your understanding.