What Franchise Payments Should Franchisees Expect to Pay?
Are you planning to run your own business? Yes, and then think about “Franchising System”, I am sure you might be happy if you will get a franchise of famous brands such as Pizza Hut, McDownload, KFC etc. But there are some facts that you should know before taking any step. One and the most important thing is that there are several one time and on-going payments related to owning a franchise. According to FTC (Federal Trade Commission) rules, franchisors must list all the fees in agreement.
Have a look on following points.
Initial Franchise Fee
This is one time fee and paid to franchisors in order to use their trademark and sell their services and products. Of course, the franchisor has established a system and put investment in making brand awareness. In return, the owner request fee to use his/her trademark and it should be as low as $10,000 and may be more than $100,000. The franchise fee depends upon the brand awareness.
Legal And Accounting Fees
This fee is compulsory because you can not open a franchise with out owning LLC (Legal Liability Corporation) license, you must hire an attorney(s) to review your financial statements and other legal entities.
Property/Casualty, Liability, And Other Insurance.
To get an idea of yearly insurance fee, take a copy of franchisor insurance requirement and fax it to your insurance company. You can get insurance requirements copy from UFOC. If you want to hire employees, then you may have to offer them employment benefits such as life insurance, other employment benefits (According to US laws), retirement plans etc.
It takes couple of years to make profit, so a question arises how should you pay the employees salaries? You may think about this during your planning phase.
The cost of franchise infrastructure is completely based on the type of business and franchisor requirements. Obviously, if franchisor is required to open a business in commercial place, then cost will be significantly high. Luckily, if your existing location meets with franchisor requirements, then there is no huge expense left except the interior of your franchise such as chairs, tables, lightening, décor etc.
Rent And Security Deposits.
These expenses are only payable, if you are opening franchise on lease space.
Some franchisor’s required fully are equipped and software up-gradation on regular basis.
In royalty you have to pay 4% to 8% on your monthly sale to franchisor. Royalties are paid on regular basis.
Not all but many franchisors request you to contribute to their marketing campaign. The total amount depends upon the franchisor to franchisor.
These are some important points that you must know before finalizing paperwork of your new business. Hopefully, these points help you to start a pleasing business.
About the Author
Sebastien Page is a business coach, author, and speaker, and the Director of Marketing for WorldFranchising.com, a directory of franchise opportunities that helps potential franchise buyers find comprehensive information”. He specializes in helping small business owners (of 500 employees or less) to increase their profit through franchising, thousands of people join his program why should not you to become a successful person.
Betty’s Visit to Sanders Cafe–the First KFC!–NO RECIPE–