|
Most
Franchisors charge an initial fee to cover the cost of setting up
the Franchisee in business.
This should not be a front-end loading of what should be a long and
sustainable business relationship that provides profit for both
parties. However, Franchisors have often expended considerable
capital to establish, prove, document and then market the Franchise
System. A recovery of those expenses has to be expected in
the initial fee.
It would be unusual for this initial fee to be the only payment
required by the Franchisor. If the correct level of support is to
be provided, regular income is required.
Ongoing fees are usually taken monthly, as a percentage of the
franchise owners gross turnover, or as a mark-up of goods supplied
directly by the Franchisor or other nominated suppliers.
Sometimes a combination of both is employed.
Some systems have a fixed amount fee, regardless of turnover, which
is paid weekly or monthly.
Take care when assessing this proposal:
- Is the
Franchisor taking income from more than one source?
- Are you going
to obtain value for money?
- It should be
easy for any Franchisor to justify their particular fee
structure.
|
|
|
