A prospective franchise owner wants to keep his monthly costs at a minimum. The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month. The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

Question

Quizplus · Accepted Answer

To find the monthly sales that would result in $250,000 in royalty payments, we can use the formula: Royalty payments = Sales x Royalty rate. Inserting the given values, we get: $250,000 = Sales x 8%. Solving for Sales, we get: Sales = $250,000 ÷ 8% = $3,125,000. Therefore, the franchisee can expect monthly sales as high as $3,125,000 to result in royalty payments of $250,000 at an 8% royalty rate.

A Prospective Franchise Owner Wants to Keep His Monthly Costs