Why Do I Pay a Franchising Fee
by Dennis Schooley*

 

The Franchise Fee is the cost of putting the Franchisee into the business of the Franchisor, not as a partner, but as a participant. Costs include:
 

  1. The development costs of all of the elements of the Franchisor’s system
  2. Training the individual Franchisee to use those system elements and programs
  3. Marketing and advertising to find Candidates
  4. Costs of qualifying Candidates including rejecting many unqualified Candidates
  5. Salaries, travel, & administration, etc.
  6. Legal expenses to draft agreements defining the methods & terms for the Franchisee to participate

The Franchise Fee is the Franchisor’s assessment to cover those costs as well as a reasonable markup. In other words, it’s the entry fee to the point of the completion of the initial training programs.

To the Franchisee it must represent a reasonable fee to allow you to become a part of the existing system, including all of the training programs that are a part of that system, to help you reach your own business goals.

When asked about the Franchise Fee, the Franchisor should have this concept clearly defined in their approach to Franchising. They should recognize that the Franchise Fee should be reflective of the value of entry into a well-developed, comprehensive system for the participant Franchisee. They should also recognize it as the recovery of costs to find, qualify, and grant legal rights to participate in that system to the very best Franchisees for the Franchisor’s business.

*Dennis Schooley is the Founder of Schooley Mitchell Telecom Consultants, a Professional Services Franchise Company. He writes for publication, as well as for schooleymitchell.blogging.com and franchises.blogging.com, in the subject areas of Franchising, and Technology for the Layman.