Padgett Business Services' 2026 Franchise Disclosure Document reports average Adjusted Operating Income across four fiscal-2025 revenue cohorts ranging from $5,318 to $271,781 per reporting franchisee. A compatible calculation across all 130 reporting franchisees produces a derived average of about $144,012. The two middle cohorts averaged $55,943 and $147,882.
This measure is not personal take-home pay. Padgett removed depreciation, interest, owners' salaries, and discretionary owner expenses from reported profit, so the result is best read as a pre-tax active-owner benefit proxy rather than passive business profit.
The principal figures above are official historical Item 19 results or simple calculations from compatible Item 19 totals. They are not a forecast, guarantee, after-tax estimate, or standardized salary. Actual results can differ materially with client count, service mix, pricing, staffing, office model, royalty rebates, financing, owner skill, owner workload, and execution.
- Legal franchisor
- SmallBizPros, Inc. d/b/a Padgett Business Services
- Disclosure reviewed
- Franchise Disclosure Document issued March 23, 2026; Item 19, pages 26–31; Item 20, pages 31–37
- Applicable offer
- U.S. startup and conversion franchises providing tax, accounting, payroll, compliance, reporting, and business counseling services
- Item 19 population
- 130 franchisees that submitted complete fiscal-2025 financial reports; 14 system franchisees operated multiple locations
- External sources
- Official Padgett U.S. franchise pages and Federal Trade Commission franchise guidance
- Date checked
- July 17, 2026
$18,721,573 of total Adjusted Operating Income divided by 130 reporting franchisees.
$72,631,244 of compatible Item 19 revenue divided by the same 130-franchisee population.
Adjusted Operating Income divided by reported revenue for the complete reporting population.
About 89% of franchisees subject to the fiscal-2025 reporting discussion supplied complete financial data.
Item 6 states 9% of Gross Receipts, with startup or conversion schedules, rebates, minimums, and contractual adjustment rights.
How much did reporting Padgett franchisees earn?
The official cohort averages ranged from $5,318 to $271,781 of annual Adjusted Operating Income. These fiscal-2025 results are grouped by total franchisee revenue, not by location, territory, or owner household. Because 14 franchisees operated multiple locations, the table should not be read as average earnings for one physical office.
| Fiscal-2025 franchisee revenue cohort | Reporting franchisees | Average revenue | Average Adjusted Operating Income | Adjusted margin |
|---|---|---|---|---|
| Under $100,000 | 16 | $66,136 | $5,318 | 8.0% |
| $100,000–$299,999 | 44 | $194,191 | $55,943 | 28.8% |
| $300,000–$499,999 | 23 | $402,905 | $147,882 | 36.7% |
| $500,000 or more | 47 | $1,143,869 | $271,781 | 23.8% |
Average Adjusted Operating Income rises sharply with revenue cohort
Official fiscal-2025 average per reporting franchisee; values are not a probability distribution.
Interpretation: Revenue scale is the dominant observable earnings driver, but the highest-revenue cohort did not have the highest percentage margin. Larger firms generated more dollars while carrying heavier salary and operating structures.
Source: 2026 Padgett Business Services FDD, Item 19, pages 27–31. Dollar values are the FDD's average P&L results for each revenue grouping, rounded to the nearest dollar.
The derived $558,702 average revenue figure is not an owner's income. The same Item 19 population produced about $144,012 of average Adjusted Operating Income after reported operating expenses and before the excluded owner-specific items described below.
What does “Adjusted Operating Income” actually include?
Padgett's Adjusted Operating Income is an official FDD measure, but it is broader than pure business profit. Item 19 says the franchisor adjusted franchisee profit by eliminating depreciation, interest, owners' salaries, and discretionary owners' expenses. Those addbacks increase the stated result compared with the franchisees' internal profit-and-loss reports.
- Revenue
- Gross receipts used to calculate monthly royalties, including accounting, tax preparation, payroll processing, and other service revenue.
- Adjusted Operating Income
- Reported operating result after the P&L operating expenses shown in Item 19, but with depreciation, interest, owner salaries, and discretionary owner expenses removed.
- Owner-operator benefit
- The most useful plain-English interpretation of this measure for an active owner: residual operating profit plus any owner salary that was added back. Part of the total may compensate the owner for professional and managerial labor.
- Passive residual profit
- Not disclosed. A passive-profit figure would require a standardized replacement cost for the owner's work, but the FDD provides no owner-hours data or uniform replacement-manager salary.
- After-tax take-home pay
- Not disclosed or estimated. Personal taxes depend on entity structure, state, deductions, distributions, and the owner's circumstances.
How fiscal-2025 revenue was absorbed before adjusted income
A reconciled view of the 130 reporting franchisees' combined P&Ls.
Interpretation: Labor is the largest stated cost block. The combined royalty line was 6.7% of revenue, below the standard 9% rate because cohort P&Ls reflect rebates, discounted schedules, minimum structures, and the timing or mix of reported Gross Receipts.
Source: 2026 Padgett Business Services FDD, Item 19, pages 28–31. Components sum to $72,631,244 of revenue; percentages use unrounded totals. “All other operating expenses” combines the remaining disclosed expense lines.
How does owner involvement change the earnings result?
Owner involvement changes what the Item 19 number means, not merely how much cash remains. Item 15 requires the franchisee to devote time and best efforts to the business, prohibits absentee ownership, and generally prohibits outside employment or another business. Padgett therefore discloses an active-owner model, not a manager-run passive investment.
Because Item 19 adds back owners' salaries, an owner who performs tax, accounting, client-service, sales, and management work may receive the economic value of both labor and residual operating profit inside the Adjusted Operating Income figure. An owner who delegates more work to employees may have less personal workload, but salary, payroll-tax, benefits, and outside-labor costs can absorb more revenue. Item 19 does not isolate a standardized owner-replacement cost, so it cannot support a precise passive-income calculation.
Do not call the full $144,012 derived average passive profit. A defensible interpretation is “average adjusted owner benefit before personal taxes and financing principal,” with an unknown portion attributable to the owner's own labor. Ask existing franchisees to separate owner salary, distributions, retained earnings, and hours worked.
Why is the 36% margin not a systemwide owner-earnings rate?
The 36.7% figure applies to the $300,000–$499,999 revenue cohort, not to all reporting franchisees. Padgett's official U.S. franchise page currently references an approximately 36% profit margin and points readers to Item 19. The current FDD's closest matching result is the 36.7% average Adjusted Operating Income margin for 23 franchisees in that single revenue grouping; the aggregate margin across all 130 reporting franchisees was 25.8%.
The distinction matters because margins were not monotonic. The under-$100,000 cohort averaged 8.0%, the $100,000–$299,999 cohort averaged 28.8%, the $300,000–$499,999 cohort averaged 36.7%, and the $500,000-plus cohort averaged 23.8%. The highest-revenue firms generated the most adjusted income dollars but also carried the largest salary burden.
Official context: Padgett's U.S. franchise opportunity page and Padgett's conversion-franchise page. Financial scope and cohort definitions are controlled by the 2026 FDD Item 19 tables.
Which franchise fees are already reflected in the earnings figures?
Royalties are already included in the Item 19 P&Ls, so subtracting the standard 9% royalty again would double count the cost. The combined royalty expense was $4.86 million, or about 6.7% of compatible revenue, across the 130 reporting franchisees.
- Royalty Fee: Item 6 states a standard 9% of Gross Receipts, subject to startup and conversion schedules, minimum payments, rebates, and a contractual right to increase the rate up to 12% within stated limits.
- Advertising Fund: The agreement permits a contribution of up to 2% of Gross Receipts, but the 2026 FDD says the fund had not been established and no contribution was then required.
- PAS License Fee: Item 6 lists $7,020–$7,370 annually. Item 19 does not identify the exact P&L line containing this charge, so it should not be subtracted again without reviewing the written substantiation.
- Tax-return or financial-report preparation: Fees may apply when Padgett performs work until a franchisee is qualified. These costs can materially affect a new or conversion owner's result and are not standardized in the cohort summary.
- Initial investment: Item 7 startup and conversion costs are not annual operating expenses and should not be subtracted from one year of revenue.
How reliable is the reasonable earnings range?
Evidence confidence is High for the disclosed historical measure and lower for any prediction about a specific buyer. The 2026 FDD provides a broad, same-brand U.S. reporting population, compatible P&Ls, revenue cohorts, and explicit adjustments. The largest unresolved uncertainty is how much of Adjusted Operating Income represents the owner's labor rather than stand-alone business return.
| Evidence limitation | What the FDD says | Effect on an earnings decision |
|---|---|---|
| Incomplete financial reports | 130 of 146 franchisees supplied complete fiscal-2025 financial data; 16 were omitted because of extensions or timing during tax season. | The omitted group could have performed better or worse, so the derived overall average is not a full-system mean. |
| Closed and part-year businesses | Profit information excludes franchisees that operated only part of fiscal 2025 because they closed; three franchisees closed during the period. | Excluding part-year closures can make the surviving reporting population look stronger than a start-to-finish ownership risk view. |
| Per-franchisee population | Fourteen franchisees operated multiple locations. | The reported result is not a clean per-unit or per-office earnings number. |
| Owner compensation addback | Owners' salaries and discretionary owner expenses were removed from expenses. | The result combines labor compensation and business return and cannot be treated as passive profit. |
| Outlet-count mismatch | Item 19 discusses 165 locations subject to reporting requirements, while Item 20 reports 164 franchised outlets at year-end 2025. | The population definitions or timing do not fully reconcile in the text; obtain the substantiation schedule before converting owner-level data to unit-level assumptions. |
| No debt or tax standardization | Interest is removed from Adjusted Operating Income and personal taxes are not part of Item 19. | Financing costs and personal tax outcomes must be modeled separately for the buyer's actual structure. |
What should a buyer verify before relying on these earnings?
Request the Item 19 written substantiation and test the owner-labor assumptions with current and former franchisees. The FTC's guide to evaluating franchise earnings recommends examining the source, limitations, geography, and applicability of financial performance representations. The FTC Franchise Rule requires a reasonable basis and written substantiation for an Item 19 claim.
- Ask for the fiscal-2025 Item 19 substantiation, including the owner-level schedule behind each revenue cohort.
- Confirm whether your planned operation is a startup franchise, a conversion franchise, one location, or a multi-location owner structure.
- Separate owner salary, draws, distributions, retained earnings, and discretionary expenses in franchisee interviews.
- Record weekly owner hours during tax season and outside tax season, plus the duties performed personally.
- Compare staffing ratios, employee salaries, outside labor, payroll burden, and turnover with the matching revenue cohort.
- Verify the actual royalty schedule, minimum payments, rebates, PAS License Fee, and any tax-preparation support charges.
- Test office rent and remote-work assumptions; the FDD allows a model without required real estate, but individual practices differ.
- Model loan interest and principal separately, then discuss entity structure and taxes with independent legal and tax advisers.
What is the strongest defensible earnings takeaway?
The strongest official evidence supports a broad fiscal-2025 Adjusted Operating Income span of about $5,318 to $271,781 across Padgett's four revenue-cohort averages, with a derived average of about $144,012 across 130 reporting franchisees. For the two middle revenue cohorts, the official averages were about $55,943 and $147,882. Revenue scale is the clearest earnings driver, but staffing intensity and owner labor determine how much of the adjusted result is true residual business profit.
The largest unresolved issue is owner compensation: Item 19 adds back owner salaries, while Item 15 requires active ownership and prohibits an absentee-investor model. A buyer should therefore verify the owner-hours, replacement-labor cost, fee treatment, closed-business exclusions, and multi-location population directly against the Item 19 substantiation and franchisee interviews before converting the historical figures into a personal earnings forecast.
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