One of the most common questions in a person’s mind, while planning to get into franchising would be how much does franchising cost? The answer to this question might vary as the fees in franchising depend on various factors. It might depend on the franchiser’s policy or company policy and several other factors. Here are a few fees that may be included:
At the beginning of becoming a franchisee, some franchisors ask for a deposit amount, which may fully or partially be non–refundable, depending on the agreement and company policy. This deposit is usually used to research the location or to help the franchisee find a suitable property. However, if the franchisee is not able to find a property within an agreed period the deposit is usually refundable.
The initial fee depends on the company and is paid by the franchisee, which covers a lot of factors such as the cost of training, recruiting, territory analysis, site identification, specialist equipment, stationary, franchisee launch and more. However, this fee is paid only after the franchise is granted.
The on-going franchise fee generally is based on a percentage of the ‘gross revenue’ or sales of the franchisee after deducing VAT. It completely depends on the way responsibilities are spilt between franchisee and franchisor and is sometimes covered in a price mark-up on the product.
Advertising fee generally forms a part of regional or national fund, which is used for either regional or national marketing or advertising campaigns. Franchisors may not ask for it in the start-up phase, however, they would expect the franchisee to take the responsibility for local advertising to promote their franchise.
It is usually assumed that the greater the perceived reputation of the franchise, the higher is the initial fee. However, that might not be the case always. There are other types of fees too, which are not quite common such as renewal fee, transfer fee, special fees and more.