Franchisee Fees – what are they?
All franchisees are required to pay franchise fees. The two types of fees are initial franchise fees and ongoing franchise fees.
Initial franchise fees are the fees you pay up front to help set up your franchise. This covers assistance with recruitment and training, site selection, territory analysis, promotion of franchise opening, stationary etc.
You need to make sure that what they are offering is value for money.
The ongoing fees are paid on a monthly basis once the franchise is up and running. It is based upon a percentage of the ‘gross revenue’ or sales of the franchisee after deducting GST. There is no set formula; rather it depends on the split of responsibilities between franchisee/franchisor. You will tend to find that the more the franchisor does for you, the higher the fee will be.
This article gives more information on franchise fees, initial and ongoing.