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Understanding Fees in Franchising | Franchise Strategy Partners

Understanding Fees in Franchising | Franchise Strategy Partners

Owning a franchise is a fantastic way for an entrepreneur to get a start in business ownership. Franchising allows you to work with a brand that has built its name already and has shown that it has a working and profitable system.

Franchisees are required to pay fees before they can take control of their franchise. This blog will discuss those fees and why they are important.

Franchise Fees

The first fee you will need to pay, and one of the most important, is the franchise fee. This fee allows a franchisee to become part of a franchise system. Franchise fees are one-time payments that range in price. Depending on how big the franchise brand is—and what the franchise fee covers—determines how much you will need to pay.

As a result of paying the franchise fee, you can now take advantage of the franchise’s brand name and trademarks. From there, you can then go and find an audience of your own to help your franchise grow.

Royalty Fees

Royalty fees are also important in franchising. The difference between these fees and franchise fees is that royalty fees are paid regularly. You and your franchisor can discuss how often these fees will be paid. Most will decide to make the payments either monthly or quarterly. While franchise fees focus on getting the ball rolling, royalty fees are there to keep the ball rolling.

A franchisee’s royalty fees allow for continued support from the franchise brand. This could include ongoing training, other needed services and marketing. The percentage that you will be responsible for paying will come from your gross sales and can differ from franchise to franchise. Royalty fees are also how most franchisors make their money.

Advertising Fees

Owning and operating a franchise takes a lot of work out of franchisees but also franchisors. In most instances, franchisors will be in control of any advertising that happens. This could be via social media, commercials and any other form of advertising available. These services are not cheap. This is where advertising fees for franchisees come into play.

Much like royalty fees, advertising fees are often paid regularly. These fees can help your franchisor afford national and local advertising, which will help build brand awareness and attract more customers!

If you are ready to start your career as a franchisee, get in touch today to get started with a free consultation.