What fees do franchisees pay to franchisors? This can be quite a long topic but the typical fees that franchisees pay are explained on this short video.

A transcript is also available below if you prefer to read!

What do franchisees pay to franchisors?

Usually right at the beginning there is a franchise fee payable and that franchise fee will often pick up the cost of training and possibly just the rights to that brand name. That can be anything from a little to quite a lot! But it is usually just part of the cost of getting a Franchise going. Franchisors will often quote two figures, so the franchise fee is one thing but the total investment is quite another. If you were to envisage setting up a large retail premises for example then the cost of those premises will be in addition to the franchise fee. So, it’s often two figures that are quoted.

If you are a mobile business for example then you may typically have a van, or a van lease and that van would be extra. Similarly if you need a lot of stock, whilst you might get some stock included within the franchise fee by and large you need to invest more. Then of course there’s working capital to carry you until such time as the franchise is on it’s feet and generating enough cash to pay for you. So just bear in mid there are tow figures.

How long are franchise fees payable for?

On an ongoing basis franchise agreements usually stipulate that there is a royalty payable to the franchisor and that might be a straight percentage, it might even be a fixed fee depending on the circumstances. Finally the duration of time that franchise agreements last should be taken into account. Usually those realities will be payable for at least five years, but potentially longer depending on the nature of the business.

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