Jeff "fuzzy" WenzelFounder, Fuzzy Wenzel Startup Consulting · Founder & CEO Driving Investment Acquisition Success

Franchisors Get Paid On Revenue, Not Profit | Frank Muller

2 Aug 2026 · 1 min

Watch on YouTube

0:47

In this segment, the speaker highlights a market inefficiency in franchising: franchisors collect royalties based on gross revenue rather than sharing in the franchisee's profitability (EBITDA), creating a conflict of interest. He proposes that investors could align their interests with franchisees by structuring investments that tie general partner and limited partner returns to EBITDA performance. Additionally, he notes that many professionals become franchise owners when they would be better off staying in their primary careers, using a neurosurgeon running a grooming shop as an illustrative example.

Chapters

Yeah. So this is another market inefficiency, franchisors and franchisees. So franchisors collect gross royalties off gross revenues. They don't have an EBITDA interest of franchisees. That's what I call a conflict of interest. So a thing that popped into my mind for investors looking at something like this is to go, what if I align myself to them on EBITDA performance, right? What if I create an investment, which is my background, that aligns the general partner and the limited partners together to drive EBITDA interest. Factor number 1. Factor number 2, many people become franchisees when they should keep their day job. Mm-hmm. I like it. Yeah. If you're a neurosurgeon, you don't need to run a grooming shop.