BUSINESS ADVICE
What Do I Get For My Franchise Fee and Royalties? by Greg Mohr, Consultant, The Franchise Consulting Company
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ne of the many questions I am asked on a regular basis is what do I get for my franchise fee and all those royalties. Paying the upfront franchise fee unlocks the door to the franchisors' proprietary business systems and more. You get the complete setup. The franchise fee is literally a license to own and operate the franchise business. The franchise fee, also commonly referred to as the initial fee, is part of your upfront, one-time payment to the franchise when you sign up to become a franchisee. The franchise fee is your ticket in the door — it’s what you’re paying the franchisor in return for the use of their brand, trademarks, products and business model. It also typically includes initial training costs and those associated with location development. Franchise fees are around $50,000. They of course differ between franchise brands, and even more so between industries. Franchisors are required to disclose this fee in the Franchise Disclosure Document.
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INITIAL TRAINING IS PART OF THE FRANCHISE FEE The initial training often includes a combination of coursework and on-the-job training. It can take days or weeks, depending on the depth of the training and the complexity of the business. This training will cover the operations of your franchise, from start to finish
home modules. Sometimes a franchisor will send an experienced member of their team to assist you the first few days of operating your location, to ensure everything goes as smoothly as possible. THE ROYALTY FEE While the franchise fee is a one-time payment, royalty fees typically occur monthly
FRANCHISE FEES ARE AROUND $50,000. THEY OF COURSE DIFFER BETWEEN FRANCHISE BRANDS, AND EVEN MORE SO BETWEEN INDUSTRIES. FRANCHISORS ARE REQUIRED TO DISCLOSE THIS FEE IN THE FRANCHISE DISCLOSURE DOCUMENT — it’s everything you need to know to run the business from day one. Remember, your franchisor wants you to succeed. Part of that is making sure you can hit the ground running when you open. Many franchisors hold training at headquarters, and you’re typically responsible for the cost of travel and lodging. However, some brands also make use of at-
FEBRUARY 2022 | WWW.FRANCHISEJOURNAL.COM
and can be thought of as a membership fee that covers the ongoing support from your franchisor. The most common way royalty fees are assessed is as a percentage of gross sales and, on average, sits somewhere between 5 and 9 percent. Some brands set a minimum dollar amount, or a percentage that varies depending on levels of sales. Royalty fees are a typical
