This is the strongest defensible range for estimated pre-tax LMI owner-operator benefit, with a base scenario near $50,000. It applies to one U.S. location-flexible professional training franchise, is expressed in 2025 dollars, and includes the economic value of the owner's work. It is not passive income, after-tax take-home pay, or an earnings figure reported by Leadership Management, Inc.
Legal franchisor: Leadership Management, Inc., a Texas corporation. The FDD was issued March 15, 2026. Item 19 states that the franchisor makes no financial performance representation. Item 20 reports 109 franchised outlets and no company-operated outlets at December 31, 2025. The applicable U.S. model sells and services leadership, management, productivity, sales, and communication programs throughout the contiguous United States; the FDD does not require a dedicated office. References: 2026 LMI FDD, cover pp. 1-2; Item 1, pp. 7-8; Item 19, p. 30; Item 20, pp. 30-34.
Evidence confidence is Limited because the FDD provides no same-brand sales or profit data and the model relies materially on broad government benchmarks. No matching 2026 public FDD on a franchise-controlled domain was verified, so FDD references are cited in plain text by Item and page.
External benchmarks: The industry match is the Census definition of NAICS 611430, Professional and Management Development Training. The revenue anchors use the IRS's 2020 sole-proprietor receipt-size table and are restated in 2025 dollars using the BLS CPI-U annual-average index; the margin anchor uses the more recent 2023 IRS Educational Services income statement. Owner-role sensitivity uses May 2024 BLS wage data. The official LMI U.S. corporate contact page confirms the Waco, Texas office associated with the brand.
Estimated annual pre-tax benefit before personal taxes and financing principal.
Average receipts within the IRS 2020 $100,000-$200,000 Educational Services band, restated in 2025 dollars; not LMI sales.
Derived from 2023 IRS Educational Services receipts and net income less deficit.
Applied to customer sales less LMI product cost, capped at $10,000 per calendar year.
U.S. system count at December 31, 2025; this is not a financial reporting sample.
There is no same-brand company-store profit proxy to fill the Item 19 gap.
What does LMI's Item 19 actually disclose?
Officially, it discloses no sales, gross profit, operating profit, EBITDA, net income, cash flow, owner compensation, or other financial performance result. The 2026 FDD says Leadership Management, Inc. does not make representations about future franchisee performance or past performance of franchised or company-operated outlets. That makes any annual owner-earnings figure an estimate rather than a franchisor-reported result. Reference: 2026 LMI FDD, Item 19, p. 30.
The absence of an Item 19 claim is permitted. The Federal Trade Commission's franchise buyer guide explains that franchisors are not required to disclose potential income or sales, but a financial performance claim must have a reasonable basis and appear in Item 19. The FTC also cautions that gross sales are not profit and recommends asking for written substantiation of any earnings claim.
Item 20's 109-outlet count shows system scale, not financial performance. The FDD also reports three openings and two nonrenewals during 2025, but those events do not reveal sales, margins, owner pay, or survival economics. No outlet count should be converted into an earnings estimate.
What counts as owner earnings in this analysis?
The result is estimated pre-tax owner-operator benefit, not pure business profit. It is modeled for a sole proprietor using an all-in Schedule C net-income margin, before personal income taxes and before financing principal payments. Because a sole proprietor does not deduct a salary paid to the owner, the figure includes compensation for the owner's selling, training, client-service, and supervisory labor.
- Included in the benchmark marginReported operating deductions, depreciation, payroll, rent, advertising, travel, interest, and other business expenses at the broad Educational Services sector level.
- Not separately deductedThe LMI royalty is not charged again in the main model because the IRS margin is an all-in net-income proxy. A separate royalty stress check appears below to avoid double counting.
- Excluded from the headline resultPersonal income taxes, financing principal, employer benefits for a replacement employee, and a separate reserve for future capital expenditures.
- Owner labor treatmentThe benefit includes the value of labor performed by the owner. It should not be described as passive residual profit or a guaranteed salary.
How is the $23,000-$118,000 owner-earnings range calculated?
The estimate multiplies three inflation-adjusted IRS receipt anchors by three transparent all-in margin assumptions. The base uses a 29.4% 2023 IRS Educational Services net-income margin. Because the FDD supplies no LMI margin distribution, the conservative and upside cases apply an editorial sensitivity of minus or plus 3 percentage points. The revenue anchors are averages within selected IRS 2020 Educational Services receipt bands, restated to 2025 dollars with the CPI-U ratio of 321.943 to 258.811. They are not LMI averages, medians, quartiles, or probabilities.
| Scenario | Revenue anchor | All-in margin | Estimated owner-operator benefit |
|---|---|---|---|
|
Conservative IRS $50,000-$100,000 receipt band |
$85,400 | 26.4% | $22,600 |
|
Base IRS $100,000-$200,000 receipt band |
$169,000 | 29.4% | $49,700 |
|
Upside IRS $200,000-$500,000 receipt band |
$363,800 | 32.4% | $117,900 |
Formula: 2020 receipt-band average × (2025 CPI-U annual average ÷ 2020 CPI-U annual average) × scenario all-in margin = estimated owner-operator benefit. Revenue calculations use the IRS 2020 Table 3 receipt-size data. The CPI-U adjustment uses the BLS annual-average CPI-U table. The base margin is $4.943 billion of net income less deficit divided by $16.808 billion of business receipts in the IRS 2023 Educational Services income statement. Values are calculated at full precision and rounded to the nearest $100 for publication.
The bars show pre-tax benefit, not revenue. Each scenario uses a different revenue anchor and an explicitly labeled margin assumption.
Interpretation: Revenue is the dominant driver. The upside case is not a forecast or a claimed upper bound; it is a higher receipt-band scenario combined with a 3-percentage-point margin sensitivity.
Sources: IRS Statistics of Income, 2020 Table 3 and 2023 Table 2; 2026 LMI FDD structural facts. No plotted value is an Item 19 result.
The IRS data cover all kinds of Educational Services sole proprietorships, not a matched cohort of LMI franchisees or only NAICS 611430 firms. The 2020 receipt-size table is also older than the 2026 FDD, and the CPI-U restatement is a broad price adjustment rather than an industry-specific revenue index. These compatibility gaps are the main reason the evidence confidence is Limited.
How much does owner involvement change the result?
Owner involvement is likely the difference between an owner-operator benefit and little or no residual manager-run profit in these scenarios. Item 15 requires an Operating Principal, or an approved designee, to devote substantial full time and best efforts to supervising and performing the franchise business. The FDD therefore does not support treating LMI as a hands-off or passive-income model. Reference: 2026 LMI FDD, Item 15, pp. 23-25.
Could a manager-run LMI franchise be passive?
Not on the evidence available. As a labor-value sensitivity, the BLS reports May 2024 median pay of $65,850 for training and development specialists and $127,090 for training and development managers. Those national employee wages are not LMI staffing requirements, do not cover self-employed workers, and exclude employer payroll taxes and benefits. They show the economic value that may have to be replaced when an owner steps away.
Owner-operator benefit is compared with national BLS employee wage markers. The markers are labor-value tests, not predicted LMI payroll.
Interpretation: The conservative and base cases do not cover even the specialist median. The upside case covers the specialist wage marker but remains below the manager median before payroll taxes, benefits, or residual profit.
Sources: BLS Occupational Outlook Handbook, May 2024 pay; IRS-based owner-operator scenarios. The comparison is an analytical labor sensitivity, not an LMI earnings claim.
| Scenario | Owner-operator benefit | After $65,850 specialist wage | After $127,090 manager wage |
|---|---|---|---|
| Conservative | $22,600 | -$43,300 | -$104,500 |
| Base | $49,700 | -$16,200 | -$77,400 |
| Upside | $117,900 | $52,000 | -$9,200 |
These residuals are simple wage subtractions for role sensitivity. They exclude employer payroll taxes, benefits, recruiting, training, and any separate owner oversight. Negative values mean the scenario benefit would not fund that national wage marker; they are not forecasts of actual losses.
The modeled benefit combines residual business income with compensation for the owner's labor. A buyer comparing LMI with a salaried job should compare hours, sales responsibility, travel, benefits, and income volatility, not just the headline dollar amount.
Which FDD fees and operating rules can move owner earnings most?
The largest disclosed franchise-specific variable is the combination of wholesale LMI product cost and the royalty base. Item 6 sets the royalty at 6% of customer sales less the cost of LMI product delivered, capped at $10,000 per calendar year. The FDD does not disclose the product-cost percentage, client mix, or franchisee gross margin, so the actual royalty and product burden cannot be reconstructed from Item 19. References: 2026 LMI FDD, Item 6, pp. 11-12; Item 8, pp. 13-14.
| Obligation or rule | FDD treatment | Owner-earnings implication |
|---|---|---|
| Royalty | 6% of sales less LMI product cost; $10,000 annual cap | The cap lowers the effective rate at higher royalty-base revenue, but actual product-cost deductions are unknown. |
| Required product purchases | Products are purchased from LMI; $2,500 minimum annual purchases after the first full calendar year | Wholesale cost and timing directly affect gross margin and cash flow. |
| Advertising | No required advertising fund; local materials require approval | Customer acquisition expense is owner-controlled but not zero and is not disclosed by the FDD. |
| Premises and systems | No required office, real estate, or computer system | Fixed occupancy can be low, but travel, software, insurance, bookkeeping, and local selling costs remain business-specific. |
| Initial-fee financing | Up to $10,000 at 0% for 36 months; $278 monthly payment | $3,336 of annual principal cash outflow for three years, excluded from operating benefit. |
How large could the royalty be at the scenario revenue levels?
A deliberately conservative gross-revenue stress check produces about $5,100, $10,000, and $10,000. It applies 6% to scenario revenue before the FDD's product-cost exclusion and then applies the cap. Actual royalty should be lower whenever delivered LMI product cost reduces the royalty base. This stress check is shown separately and is not subtracted from the all-in IRS margin model.
| Scenario | Scenario revenue | Gross-revenue royalty stress | Effective stress rate |
|---|---|---|---|
| Conservative | $85,400 | $5,100 | 6.0% |
| Base | $169,000 | $10,000 | 5.9% |
| Upside | $363,800 | $10,000 | 2.7% |
If a buyer uses the FDD's full $10,000 initial-fee financing, the scheduled $278 monthly principal payment reduces cash available by $3,336 per year for 36 months. Applied mechanically, first-three-year cash after that principal would be about $19,200, $46,400, and $114,600 across the three scenarios. Personal taxes remain excluded. Reference: 2026 LMI FDD, Item 10, p. 16.
What can make actual LMI owner earnings fall outside the range?
The largest unresolved uncertainty is actual same-brand franchisee revenue and product-level gross margin. Item 19 supplies neither. A low-overhead structure can protect margin, but it does not create customer demand; owner sales productivity, account size, repeat business, program mix, product cost, travel, local marketing, and collection timing can move results far beyond a broad industry scenario.
- Revenue anchors are not LMI performance bandsThe three receipt levels are averages within selected 2020 IRS Educational Services size categories and are restated in 2025 dollars with CPI-U. They are analytical anchors, not quartiles, probabilities, or typical LMI outcomes.
- Margin sensitivity is editorialThe 26.4% and 32.4% margins are the 29.4% IRS base margin minus or plus 3 percentage points. LMI provides no margin distribution that validates the spread.
- The IRS sector is broader than the franchise formatEducational Services includes businesses with different customer bases, delivery models, staffing, and capital intensity. The closest Census industry definition improves conceptual fit but does not isolate LMI operators.
- Owner labor is embeddedA highly active owner's benefit may look larger than residual business profit because the owner is also performing sales, facilitation, account management, and supervision.
- Losses and weak operators are not removed from the base marginThe 2023 IRS margin uses net income less deficit across businesses with and without net income, which is more conservative than using profitable returns only.
What should a buyer verify before relying on any earnings estimate?
A buyer should replace broad benchmarks with same-brand records before making a capital decision. The verification work should focus on revenue quality, product costs, owner hours, and the difference between labor compensation and residual profit.
- Re-check Item 19 and amendmentsAsk for the latest FDD and confirm in writing whether any updated financial performance representation or location-specific supplement exists.
- Request written substantiationIf any franchise seller states a sales, income, or profit number, ask for the written basis and confirm it is permitted under Item 19 and FTC rules.
- Interview current and former franchiseesAsk for full-calendar-year gross receipts, LMI product cost, royalty base, local marketing, travel, contractors, bad debt, owner hours, and owner distributions. Include newer, mature, lower-volume, and former operators listed in Item 20 attachments.
- Separate labor from return on ownershipRecast each franchisee's result into owner wages for work performed, residual operating profit, retained cash, debt principal, and personal taxes.
- Build a monthly cash-flow modelReflect product purchase timing, the $2,500 annual minimum after the first full year, royalty mechanics, seasonal client payments, travel, insurance, software, and any $278 monthly financing payment.
What is the most reasonable earnings takeaway for a prospective LMI owner?
The strongest defensible published range is approximately $23,000 to $118,000 in annual pre-tax owner-operator benefit, with a base scenario near $50,000. It is a structural FDD-anchored scenario, not an official Item 19 result or a prediction. The most important earnings driver is annual client revenue; the largest unresolved uncertainty is the absence of same-brand sales, product-cost, and profit data.
Owner involvement materially changes the interpretation. The FDD requires substantial full-time supervision by an Operating Principal or approved designee, and the scenario benefit includes the value of the owner's labor. The broad evidence does not support assuming passive, manager-run income: conservative and base benefits do not cover the national BLS specialist wage marker, and none covers the manager median before employer costs.
A buyer should treat the range as a screening tool only, then verify the latest Item 19, obtain written substantiation for any financial claim, and reconstruct earnings from franchisee interviews using gross receipts, LMI product cost, royalty base, marketing, travel, labor, owner hours, financing principal, and distributions.