So we are going on another rant. A lot of times when we talk to people about franchises they get very defensive about having to pay quote-unquote franchise fees or royalties. What we want to discuss today is why these fees are very important to what you are acquiring (when buying a franchise), and in most cases are a good thing, not a bad thing, when you acquire a good franchise. We’ll start off by laying out what are some of the types of franchise fees, and discuss a little bit about each one of them, what they mean to a franchisee, what the franchise is getting for them and why they can be a good thing, not a bad thing.
Let's start with a little education because those F-word fees can actually be a good thing. First, you will need to understand what they are, and in each franchise, there are a few of them you want to pay attention to. There's the franchise fee, there are royalties, there might be an advertising fee, there might be technology fees, training fees, and marketing fees. It may seem so overwhelming, but if you were to go out and start your own business, you're going to have these exact same fees (costs) in any business. It's just a cost of doing business. So let's break down these fees and understand what they are and how the franchise uses them.
The Franchise Fee
The Franchise fee is the fee that you pay when you acquire the franchise. That's your upfront investment to have rights to use that franchise's name, branding and intellectual property and systems.
It's like your golden ticket, your entry ticket to get the rights to the name, the logo, all of that. So you might be asking by now what does a franchise fee cost?
Well, first off, …
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