System sales

System sales is a business term used in the franchising industry. Franchisors provide supplies, marketing and administration services to franchisees in return for a slice of the franchisees ' revenues. Some franchisors also operate some outlets direct. System sales represents the total sales of all outlets that use a brand, or that use all the franchised brands owned by one franchisor. It is always higher than the franchisor's revenue for accounting purposes.

For example say an average Fast Eats restaurant has annual revenue of US$1 million. Fast Eats Inc operates 1,000 Fast Eats restaurants direct and franchises another 3,000 outlets, taking a 20% cut of sales. Fast Eats Inc's reported revenue is $1.6 billion (1,000 * $1million from direct operations and 20% * 3,000 * $1million from franchised outlets). But Fast Eats' system revenue is $4 billion (4,000 * $1 million).

System sales provides a useful way of assessing the growth of a franchised brand. A franchise operator can easily increase its reported revenue by taking more outlets under direct management, but that may not be the best option for the profitability of the business.