The Four Most Common Franchise Fees – Episode 1 – Part 2
What is involved financially when one buys into a franchise? It is a question we get asked all of the time here at Thrive15, and we would like to invite you to sit in on the conversation between franchise coach, Terry Powell, and business coach, Clay Clark, as they discuss what fees are generally associated with the franchise business model and what they all mean. Many business owners will complain that they’re scared to make the move into opening a second location or purchasing a secondary franchise location, but one important thing to understand is that the franchisor makes money off of the franchisee’s success which is why they have developed systems to ensure that success. These systems are going to help the business run smoothly and efficiently even without the business owner being present. As far as royalties go, franchisees should expect to pay anywhere from 5%-15% in royalties depending on the industry and business model. There are typically two different types of royalties; percentage based royalties and fixed royalties. Percentage based royalties are typically based on monthly revenues, or sometimes weekly revenues, and fixed royalties are set amounts that are required to be paid no matter the amount of business the franchise is producing. Fixed royalties, while they might not be as common, do have some benefits. One being predictability and secondly that it is a great ifncentivisor to produce more income because the fees are capped at a certain amount. The downside to fixed royalties are that it may be difficult or intimidating in the beginning to have a set fee every month when you’re not sure what volume may be coming in. To learn about the rest of the fees that are typically associated with the franchise business model, tune into the rest of the series right here on the Thrive15 platform today.