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The Franchise Fee In-Depth

When you sign an agreement with open a franchise, you’re probably going to be expected to pay a franchise fee. As you begin your search, learn the basics of franchise fees and prepare yourself for this necessary expenditure.

The nature of the franchise fee

The main thing that distinguishes the franchise fee from other payments you will make to the franchisor is that it is a one-time fixed fee. This is in contrast to other fees levied by the franchisor, such as royalty payments or advertising fees, which are generally recurring in nature and often calculated as a percentage.

Essentially, the franchise fee is like a membership fee for joining a club. It’s made when you first buy into a particular franchise system as a way to denote that you are now an authorized franchisee of this company. It gets you in the door, so to speak.

Also, while franchise fees are generally the same amount for all franchisees buying into the company, they vary drastically across industries and brands. For some simple service franchises, the franchise fee may only amount to a few thousand dollars. However, for more famous brands they can reach upwards of $100,000.

What you can expect to get in return for the franchise fee

The detailed explanation of what is covered by the franchise should be included somewhere in the franchise agreement, and actual specifics may differ depending upon the company. However, there are some standard elements of the franchise fee that you can expect any time you purchase a franchise.

Typically, paying the franchise fee allows you to use the franchisor’s brand and trademarks for the duration of the franchise agreement. Also, you will be allowed to use any proprietary processes and systems that make the company unique. These processes are often one of the most valuable parts of a franchise business.

Although it doesn’t apply in every case, many times the franchise fee will also give you access to special, pre-negotiated vendor pricing agreements, software platforms that are vital to running the business, equipment, and operational manuals. Sometimes, the franchise fee also helps to cover costs for your location’s grand opening event.

How is the amount of the franchise fee determined?

There is no set formula for determining the amount of a franchise fee, but in general, the more value the brand holds the higher the cost will be. Value, of course, is a qualitative attribute, but it often combines name recognition, built-in customer bases, the complexity of proprietary business systems, intellectual property, and more. The more of these qualities that the franchisor brings to the table, the more likely it is that they’ll be able to command a higher franchise fee.

Fitting the franchise fee into your budget

The franchise fee is only a small part of the total amount you are going to invest in a franchise business, but it can still have a significant impact in your choice of which company to partner with. Make sure that you research your options thoroughly so that you know what to expect, and assess how much you think you can afford to spend on a franchise fee as a part of your overall budget range.

Next Steps

If you’re considering a franchise investment or just have questions, feel free to contact one of our franchise specialists to learn more about the process and all the different franchise opportunities by completing our request form or calling 1-850-366-2394.

attributes

The Best Franchise Companies Share These Attributes

Searching for a franchise company involves hundreds of intricate considerations, and it’s a decision that requires enormous thought and analysis. While it’s too simplistic to say that there is a definitive set of attributes that makes a company a good fit for you, there are certain characteristics that many of the best franchise businesses exhibit on a daily basis.

They prioritize effective communication

One of the most astute things you can do during your franchise search is paying close attention to the communication habits of the various franchise representatives that you interview with. The tendencies they display during this phase are likely to continue should you move forward with the relationship, so think about how you want your prospective business partner to communicate.

Are they prompt with responses and forthcoming in terms of detail, or do they make you work hard to get any little snippet of information? Do they help you find the answers you are looking for, or do they leave you flailing in the wind to figure things out on your own? Successful franchise companies understand that effective communication is a crucial part of their organizational foundation.

They maintain integrity in all interactions

Integrity means so many different things in business. It means that the corporate representatives don’t have anything to hide. It indicates that when things get difficult, they won’t go looking for a quick, and possibly legally dubious, fix. It means that the company has actual value to provide and that it isn’t interested in duping people out of their money or time. It shows that the franchisor treats all of the people involved in the business, including the employees, customers, vendor partners, and franchises as human beings.

They look for long-term partners

Not every endeavor is going to work out, of course, but one thing that sets high-quality franchise companies apart is that the look for franchisees they can build long-term partnerships with. These are the kinds of franchise owners who become even more invested in the company ecosystem over time, and continually educate themselves about the company’s values and culture. A successful franchisor prizes these types of relationships with their franchisees and looks for partners they can trust to help grow the business.

They have stable leadership at the top

Maintaining stable leadership doesn’t equate with having the exact same executive team together for a certain number of years. New opportunities are going to arise and people will inevitably want to pursue them. What it does mean, is that the company should largely be free of organizational turmoil surrounding leadership changes. No business is perfect, and sometimes mistakes happen that need to be rectified. But what should trouble you is noticing a defined pattern of instability in the highest echelons of the company.

They value their customers

You can generally view a company’s ethos towards its customers as a microcosm of its relationships in general. If the company culture is built around disdain for the customer, then this feeling will infiltrate other areas of the business as well. On the other hand, if respect and value for the relationship between the customer and brand are built into the company’s fabric, then it’s likely that they approach every relationship with this same level of respect and decency.

Next Steps

If you’re considering a franchise investment or just have questions, feel free to contact one of our franchise specialists to learn more about the process and all the different franchise opportunities by completing our request form or calling 1-877-650-5551.

training

Key Training & Support Questions to Ask When Buying a Franchise

Opening a franchise is the beginning of an educational journey, and it’s the responsibility of the franchise owner to learn as much as possible about their business, their market, and their customers in order to maximize their chances of success. Thankfully, you don’t have to go through the process alone. Your franchise company will usually provide help in the form of training opportunities and other support structures, but it’s crucial to know what you’re going to receive before you sign an agreement.

What does the initial training period entail?

Almost every franchisee’s journey with the company will begin with an initial training period. Typically, these sessions are conducted at company headquarters, or at “corporate university” or training campus if the business is large enough.

But while every franchisee is likely to undergo some type of structured training, the length, intensity, and experience can vary wildly depending upon the company in question. It could be anywhere from a day spent reviewing manuals to a month of intensive hands-on experience with operational techniques. It’s important to ask your franchise representative to explain the processes in detail so that you can decide whether or not the training program is sufficient for your needs.

What sort of training and support opportunities exist beyond the initial period?

While the initial training period is designed to put you on firm footing as you open your franchise location, it shouldn’t be the end of your education with the franchise. Ideally, you will receive ongoing training and support as a valued franchise owner whenever the situation warrants it. If new operations systems are developed, will the corporate company bring franchise owners back on site for updated training?  Does the franchisor offer extended development modules that allow franchise owners to hone their skills in specific areas?

Are any royalty payments used for specific training initiatives?

Many potential franchise owners are aware that royalty payments are often levied in order to help the parent company pay for a variety of expenses, including national marketing and advertising. However, some of these royalty payments may also be allocated to ongoing training. Ask you franchise representative to explain the training budget for the company in detail, and you may get an idea of what priority franchise owner support is for them.

What do other franchisees have to say about their training experiences?

Employees of the franchise company should be able to explain the training programs in detail to you, but it also helps to get a first-person account from someone has gone through the experience. Seek out reviews from your fellow franchisees, and don’t hesitate to reach out to them directly and inquire about their experiences.

What are the most significant problems most franchises face?

When franchise owners need support from the corporate company, what are the main reasons for it? This is a question that can have serious implications for your business because you are likely to encounter similar situations throughout your ownership journey. Learn what common issues you may face, and also how franchise owners work with the franchisor to resolve them.

Is there any assistance offered for choosing a site?

While some service franchise owners won’t even have to worry about selecting a site location, for many others (and of course, for retail franchises as well) this will be one of the most important decisions you make. If you are gong to be opening a physical office location, it’s worth asking the franchise representatives if they provide any assistance with the location selection process. They may have a list of preferred sites, cost analysis projections, or market research data that can help predict foot traffic levels.

Next Steps

If you’re considering a franchise investment or just have questions, feel free to contact one of our franchise specialists to learn more about the process and all the different franchise opportunities by completing our request form or calling 1-877-650-5551.