The Number Every Franchise Buyer Gets Excited About — And Why It’s the Wrong One

You ask a franchisor for a sample P&L.

They send it over.

You open it. You see $500,000 in revenue.

Your heart skips. Half a million dollars. That’s the life.

Then you scroll to the bottom.

$20,000 in profit.

That gap — between what excites you and what actually lands in your bank — is one of the most common shocks in franchising.

And it catches smart, thorough people out every single time.

Not because they didn’t do their homework. Because they were looking at the wrong number.

This post is for anyone researching a Children’s Sports Franchise who wants to understand what the numbers actually mean before they go any further.

It’s based on a recent Courtside Conversations episode by Little Boomers Basketball founder, Emile Koorey.

Watch the Full Breakdown

The Biggest Mistake: Focusing on Revenue

Most people walk into a franchise conversation focused on one number.

Revenue.

It feels logical. Big revenue means a big business. Big business means big income.

That’s not how it works.

Revenue tells you what the business collects. Not what you take home.

Two franchises can have identical revenue — and completely different realities for the owner.

One is thriving. One is barely keeping the lights on.

The number that separates them is net profit.

And to get to net profit, you need to understand one thing: unit economics.

What Is Unit Economics?

It sounds technical.

It’s not.

Unit economics simply means: for every dollar this business earns, where does it go — and how much is left?

That’s it.

Understanding unit economics is the difference between being impressed by a big topline number and knowing whether this franchise actually works for your life.

Here’s how Emile breaks it down — starting with a single dollar.

How a Dollar of Revenue Actually Moves Through a Franchise

Step 1 — The Royalty Fee (First Thing That Comes Off)

Every franchise has one.

It’s the ongoing fee paid to head office — for the systems, the brand, the support, and the ongoing guidance.

At Little Boomers Basketball, that’s 10% of revenue.

Your dollar becomes 90 cents. Immediately. Before you’ve paid for anything else.

If you haven’t looked into how royalty fees work, do that before you evaluate any P&L.

Step 2 — COGS (The Direct Cost of Delivering Your Service)

COGS stands for cost of goods and services.

These are the costs you must pay every time you deliver your service.

In children’s basketball, that’s:

• Court hire
• Coaches’ wages

No court. No coaches. No class. Simple.

Target: keep COGS below 40% of revenue. A well-run operation sits around 30%.

At 30%, your 90 cents becomes 63 cents.

Step 3 — Expenses (The Cost of Keeping the Business Running)

These are your indirect costs.

Not tied to a specific class. But essential for the business to function.

Examples:

• Marketing and ads
• Your own wage
• Software and admin tools

These are different from COGS.

You don’t need them to run one class. But you need them to run a business.

Target: keep expenses below 30% of what’s left.

That pulls roughly another 19 cents from your 63 cents.

You’re now sitting on 44 cents of net profit.

Step 4 — Tax (Don’t Forget This One)

This is where a lot of people get caught.

In Australia, operating through a company structure means around 25% company tax on your net profit.

That’s another 11 cents.

What you’re left with from your original dollar: 33 cents.

That’s what’s in the bank. That’s the number that matters.

“It’s not revenue. It’s how much net profit.” — Emile Koorey

In the children’s sports industry, a healthy franchise should be hitting a minimum 30% net profit margin.

That’s your benchmark. Hold every franchise you look at to it.

What This Looks Like With Real Numbers

Abstract examples are useful.

Real numbers are better.

Say you’ve got 300 kids enrolled in an 8-week term, each paying $200 per child.

That’s $60,000 in revenue for the term.

Now work through the formula:

• 10% royalty fee: $6,000 to head office
• Court hire: 19 classes per week × $80 per hour × 8 weeks
• Two coaches: $30 per hour × 19 classes × 8 weeks

Once you’ve run those numbers properly, what’s left is your net profit before tax.

Not a guess. Not a projection. A real figure.

The point isn’t one specific answer from one case study.

The point is the process.

Revenue minus royalty, minus COGS, minus expenses equals net profit. Then you pay tax.

That formula works whether you’re running 100 kids or 500.

And some Little Boomers Basketball franchisees are running 500 enrolled kids.

For a full breakdown of how the business model generates revenue and where each dollar flows, read How a Little Boomers Franchise Makes Money (A Simple Profit & Loss Breakdown).

What Smart Franchise Buyers Do Before They Sign

They ask for a real franchisee P&L. Not a modelled projection.

They look at the bottom line first. Not the top.

They ask what the net profit margin looks like across the network.

They understand what the COGS are — and whether they’re realistic for their location.

They factor in royalty, their own wage, marketing, and tax before they decide if this works.

The buyers who get caught out aren’t careless.

They just focused on the wrong line.

Common Mistakes People Make

• Treating revenue like take-home pay
• Ignoring the royalty fee in back-of-envelope calculations
• Not asking to see a real franchisee P&L
• Forgetting to include their own wage as an expense
• Comparing franchises on revenue alone — without asking about net profit
• Not factoring in tax when calculating what they’ll actually take home
• Accepting modelled projections instead of asking for real data
• Assuming all franchises have similar cost structures

Key Takeaways

• Revenue and net profit are not the same thing — ever
• Unit economics is the most important concept to understand before you compare any two franchises
• The royalty fee is the first deduction from every dollar you earn — know what it is upfront
• COGS should sit below 40% of revenue in a children’s sports franchise
• Aim for a minimum 30% net profit margin — that’s the industry benchmark
• Always ask for real franchisee P&Ls, not modelled projections
• You don’t need a finance degree to understand this — if it can’t be explained simply, that’s a flag

FAQ: Common Questions People Ask

Do I need a financial background to run a franchise?

No.

Most franchisees don’t have one.

What you need is a willingness to understand a few core concepts — and the discipline to track them. The system is there to support you. The numbers become second nature quickly once you’re inside it.

How do I know if the profit margins I’m being shown are realistic?

Ask for real franchisee P&Ls.

Not projections. Not models. Actual data from actual operators.

Then ask if you can speak to two or three existing franchisees directly. People on the inside will tell you whether the numbers on paper match what actually lands in their account.

What’s a healthy net profit margin for a children’s sports franchise?

Aim for 30% minimum net profit after royalty and COGS.

Once you factor in expenses and your own wage, the number will move. But a well-run operation should still be in strong profitable territory.

Model your own numbers. Don’t assume an average applies directly to your situation.

What’s the difference between COGS and expenses?

COGS are direct costs — you cannot deliver the service without them.

Expenses are indirect costs — you don’t need them for a single class, but you need them to run a business.

Both come out before you reach net profit. Both matter.

Is the royalty fee negotiable?

Usually no. And that’s actually a good thing.

A standardized royalty means every franchisee is on equal footing. What matters is whether the support, systems, and brand justify the percentage. In a well-run franchise, they should — clearly.

Keen to Learn More?

If you want to see how this applies to a real franchise system, explore the Little Boomers Basketball franchise for a clear picture of what owning a territory actually looks like.

If you’re ready to run these numbers against your own situation — your location, your goals, what you need this to give you — that’s exactly what a Discovery Call with Emile is for.

Free. No pressure. Just a conversation to see if this fits your life.