All you need to know about Franchise Fees

If you have ever thought about a franchise business then you would have thought about franchise fees, consciously or unconsciously. But when you think of franchise fees it’s not the only thing you are concerned about, it’s actually, referring to various cost that you’d incur to own a franchise. This article introduces you to various fees that any franchise charges. It is helpful to know what they are as you are more prepared because you eliminate object of surprise that could lead you to financial crisis.

This is the fees paid by an individual to franchisor for a purchase of franchise. Once franchise fee is paid and all agreements are signed, you become officially a Franchisee/Franchise Owner.

Initial or entry fees could be the full payment of franchise fees or partial payment that is paid to confirm that the process of franchise purchase is initiated.

This is a continuing fees charged by every franchisor, it is typically a fee charged as a percentage of sales or a fixed amount paid weekly, monthly, yearly or periodically as agreed upon. The fees is ongoing payment, a franchise makes to the franchisor, for the continuous use of goodwill, brand, ongoing services provided to franchisee and other administrative charges.

Very few franchisors fix advertising and marketing fees, however marketing fees are charged by most franchisors towards promotion. Franchisors take initiative to promote the brand at regional and national level to benefit all the franchisees with such boundaries. Each franchisee contributes for same in the form of advertising/ marketing fees.

Franchises are purchased only for fixed term of a year, three years or more, at the end of which either the franchise could be sold or rights renewed, however at a cost. Such cost is termed franchise renewal fees.

There are also specific fees charged by franchises that are termed one time fees for the services that are not included in the agreement as part of franchising service, as and when they occur.

Franchise exit fees is charged on two occasions a) if the franchisee decides to exit prior to starting the franchise but after initiating the purchase process and b) if franchisee decides to exit before the term for which franchise was purchased.

There are many such fees charged by franchisor which in most cases

are essential for business development and are explained in

detail in the Franchise Disclosure Document

(FDD). At IIHT Technologies, franchisees are

made well aware of costs prior to transfer of the rights so as to ensure

that a prospective partner is well aware of their and franchisor’s financial responsibilities among

others.

Corporate Headquarters#15,Sri Lakshmi Complex, 4th Floor, St. Marks Road, Bangalore - 560 001. India

Tel: 91 80 6160 4545 e-mail: [email protected] web: www.iihttechnologies.com/