Fee Payment
October 16, 2008
Cons: Payment of Fees
A typical term of a franchise agreement is 5 or 10 years, depending on the franchise. You will pay an initial fee for entering into the franchise, followed by renewal fees at the end of the agreed upon term. A typical initial fee ranges from $25,000 to $35,000, with the renewal fee being around $5,000. There may also be a site selection fee of around $5,000 to offset the franchisor’s costs of lease negotiation and favourable location.
The franchisor also constantly receives royalties based on the business done by your location. Royalties are normally based on your gross sales, varying from 1% to 10%, though if your location is selling more, you will probably pay less in royalties.
You are also required to contribute to the franchises advertising fund at a national or regional level. This is for your use of the franchises advertising. You are also required to invest a certain amount in your own local advertising.
