Franchise Agreement Fees

Does the franchisor calculate travel costs and staff salaries for on-site assistance? Does the franchisor earn revenue from the sale of goods and deliveries to its franchisees? Are supplier rebates considered franchisor revenues or are they passed on to franchisees, either as a reduction in their merchandise costs or as a contribution to their advertising means? Some industry-specific fees, such as .B. Hotel booking fees for hotel franchises, are also available in the FDD for a franchise within this sector. In addition, some operating costs may not be mentioned within the FDD, for example. B employee salaries. This royalty structure is similar to the one mentioned above. The franchisor applies a higher percentage of royalties on the basis of cumulative annual revenue. During periods when the licence fee, as a percentage of revenue, does not meet the minimum licence fee, the franchisor pays a minimum licence fee. Minimum royalties on royalties are generally adjusted regularly on the basis of a CPI or other base. Therefore, the initial costs of introducing franchisees (recruitment, training, location, site development, first field services, etc.) should be assessed as part of the initial fees, while the franchisor`s ongoing service costs (field services, home assistance, research and development, business expenses, etc.) should be assessed on the basis of operating costs.

This segregation will ensure that the franchisor remains financially healthy regardless of the sale of the franchise. This pricing structure varies between 2 and 5% depending on the type of industry and the number of franchisees involved. In some agreements, there is a monthly lump sum and a percentage of turnover. The difference between the performance before the franchisee and the acceptable royalty rate provides the franchisor with a benchmark for the maximum costs affordable or acceptable to the franchisee. Rental or real estate costs are a special case in the breakdown of franchise fees. Although some, because of their experience, indicate a range for the first three months of renting a property, a franchisor, due to its great variability from place to place and on a case-by-case basis, will not give an estimate for real estate and building construction if necessary. In addition, some deductibles do not charge rent or real estate charges, since the deductible abl. From the franchisee`s residence. In some franchise systems, the licence fee is defined as a minimum or fixed fee or other basis.

This structure is used by some franchisors, who believe that the percentage royalty reduction for the increase in turnover is fairer for the franchisee, as it offers an additional reward for superior performance and nevertheless offers an acceptable return to the franchisor. Some also believe that the decline in the percentage of franchisees encourages franchisees to report more accurately the total turnover. There are no „standard“ franchising fees that all franchisors introduce. Each company sets its own royalties. When you enter into a franchise agreement as a franchisee, you generally agree to pay the franchisor a large number of one-time and current costs. Most franchisors try to spend their franchisor`s contributions in their markets, even if this is not in franchise agreements. The rationale for spending money outside the contributor market is this: if certain amounts and fees vary, you should have access to an organization`s franchise fees before signing your franchise agreement. The Federal Trade Commission (FTC) requires franchisors to deivate all fees and fees in their uniform Offering Circular (UFOC) franchise that they must make available to potential franchisees prior to the sale of a franchise.