Teams go from 8- or 9-win seasons, or worse, to competing for titles all the time. How did the 2005 Penn State team manage to reach the Orange Bowl? It should have realized it couldn't actually improve from its 4-7 record the year before. As far as how this team can improve? Well, the recruiting has been pretty damn good since James Franklin and his staff got to State College, and that will only improve if (when?) the team shows this fall that it's on track to get back to the upper tier of the B1G and potentially college football as a whole.
The 2017 team could potentially include a returning starter at QB, one of the best running backs in the sport, one of the best groups of receivers in the sport, a still-young but talented and more experienced offensive line, and talented players throughout the defense - though I'll give you that DT and LB depth remains a question mark at this point. There's no reason why the team I just described can't challenge the best teams in the conference, at least there shouldn't be.
I wasn't necessarily comparing Pat Chambers' situation to Franklin's, as football and men's basketball are not, and likely will never be, on the same level at Penn State. Rather, it's an indication that the athletic department isn't going to go firing coaches left and right and turn this job into a revolving door. Franklin won't be a lame duck until we're entering the 2018 season, so there will be plenty of time for him to earn his next contract. The overall point remains, however, that he isn't going before the end of the 2017 season (barring a complete disaster this season, e.g. a 6-6 season with losses to Pitt and Temple).
Finally, there's no comparing a normal business to a college football program, or any other job in sports for that matter. Franklin's salary is in line with the going rate for those who take premier head coaching jobs. And no matter what you want to say about Penn State's recent history, given its tradition and built-in advantages it remains a top job. Using your 50 cents to the dollar example, I'm not sure a coach who only commands $2 million per season could have pulled in top-20 classes and avoided a losing season in PSU's situation.