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Resources
The Pros And Cons Of Buying A Franchise For Sale
By Christine Harrell
You might be surprised at how many of the businesses you patronize are franchise businesses. Everything from the restaurants you regularly visit to tax preparation services you count on every year Read more...
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Resources
Why Do Franchise Owners Pay Franchise Royalties?
A franchise owner is a person who gives his right of marketing and selling, to a third party (franchisee) under his trademark label. The franchisee will continue his business of marketing and selling Read more...
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Resources
Franchises Offer Shortcuts, But Not Control
By Tim Knox
Q: I will be retiring this year at age 60 and intend to fulfill my lifelong dream of owning my own business. I'm too old to start from scratch, so I'm looking at several franchise opportunities, Read more...
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Franchise is a science fiction short story by Isaac Asimov. It first appeared in the August 1955 issue of the magazine If: Worlds of Science Fiction, and was reprinted in the collections Earth Is Room Enough (1957) and Robot Dreams (1986). ...
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Below, you'll find most information
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What Are Franchise Royalty Fees?
Franchise royalty fees vary from one franchisor to the next. They can be very simple or somewhat complex. To begin with, let’s examine why franchisors assess a fee in the first place.
Franchisors are allowing you, the franchisee, to utilize their proven business model in order to successfully run your franchise. Franchisors will assess an upfront fee to get you in the door and help you get your doors open for business. But this upfront fee basically covers their costs. It is not really a profit generator.
The primary source of revenue for a franchisor is the ongoing revenue generated from your business operations. In that regard, it is in the franchisor’s best interest to make sure that you are successful.
The best way to illustrate the different types of fee arrangements is to give you some examples. Here are 5 franchise opportunities that I like:
- Handyman Matters. This is a handyman with over 130 franchised units. They assess a 6% royalty on gross revenues and a 1% contribution to a national advertising fund. This is a fairly typical arrangement.
- Maui Wowi. They are the largest Hawaiian Coffee/Smoothie in the United States with 320 franchised units. They do not assess any royalty fees. Instead, they assess a 12% Advertising Fee based on product purchases (not gross sales).
- Pressed 4 Time. This is a mobile dry cleaning with 180 franchised units. They assess a typical royalty fee however it is scaled based on the monthly revenue. If the monthly revenue is less than $15,000/month, the monthly royalty fee is 6% of gross revenue. If the monthly revenue is between
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