Enok, a prospective franchise owner, is looking to keep his monthly costs as low as possible. The franchisor he is checking out is advertising that royalty payments of 8% of sales could be as high as $300,000 per month. The franchisor is claiming that a franchisee can expect monthly sales to be as high as
A) $3,125,000.
B) $3,000,000.
C) $3,750,000.
D) $300,000.

Question

Quizplus · Accepted Answer

Royalties are monthly fees collected by the franchisor. These fees are a percentage of the total monthly sales. If the franchisee generates $3,750,000 in sales, he/she will pay 8% of that amount to the franchisor. 8% of $3,750,000 = $300,000. The mathematical question is: 8% of what revenue amount = $300,000? 8% of X = $300,000. X = $300,000/.08. X = $3,750,000.

Enok, a Prospective Franchise Owner, Is Looking to Keep His