The Four Most Common Franchise Fees – Episode 1 – Part 1
If you’re thinking about franchising, but would like to learn more about the fees that are associated with the franchise model, you won’t want to miss out on this series. Terry Powell, who has been called the godfather of franchising, will walk you through the most common fees you’ll be signing up for when you buy into a franchise model. Join the conversation between Terry and former SBA entrepreneur of the year turned business coach, Clay Clark, for some valuable information that you need to know before franchising. If you don’t know what franchising fees are, it might be good to have a general understanding of that before we divulge further. A franchise fee is the upfront fee that’s charged when you purchase a business. It’s basically the amount of money you pay in order to secure the rights to work with the brand for a given period of time. Most often, the franchisor does not even make a profit off of the fees that are charged. The fees are charged to recover the up front cost that it took to get the business franchise ready and to bridge the first stage of the relationship where corporate is not making any money from royalties. Everything is regulated as far as fees go, and it’s all disclosed in the franchise disclosure document, so you won’t be blindsided by any fees, but they are sometimes broken up into different line items. The two most common fees are franchise fees and royalties. Franchise fees are the initial cost of opening the business, or initial investment, and royalties are the monthly or weekly payments that they franchisees agree to pay the franchisor for the life of the agreement. Royalties are typically the reason why businesses choose to franchise in the first place, and this is their opportunity to get a return on investment. For more information on what fees are involved in franchising, tune into the rest of the series.