The Four Most Common Franchise Fees – Episode 1 – Part 3
What exactly are the fees associated with purchasing a franchise and what exactly do they mean? If these are questions that you’ve asked and you’re wanting to learn more about the most common franchise fees, then you’ve come to the right place. In this video series, Terry Powell, franchise coach, and Clay Clark, business coach, will discuss the most common fees associated with franchising. We recommend that you tune into the first video in the series where franchise fees and royalties, the two most common fees, were discussed. In some occasions, some franchises may not be required to pay an ongoing royalty, but instead they will be required to buy certain items from the franchisor. The fee is still disclosed because the franchisor would be required to disclose the amount of mark up in the product being sold to the franchisee. Ultimately, the franchisor will still make money off of the franchisee, it just may be structured differently in different industries. Another fee that is common is an advertising contribution fee which is a stated amount of money that the franchisee gives to the franchisor on a regular basis for the purpose of advertising the brand. The fees that are taken are kept separately from the royalties and other fees strictly for the purpose of brand awareness which in turn helps the franchisees. For example, you may see a commercial that runs on television for a known brand, this is often the result of the fees paid by the individual franchisees towards an advertising fund. Another typical fee that some corporations require is called an advertising commitment fee. This is a specified amount of money that the franchisee is required to spend on local market advertising for the business. They do this because they know from the success of their business model what it takes to do a specific amount of business.