Are you interested in owning a franchise but feel overwhelmed with the details?
There are many aspects of franchise ownership—from choosing an industry to estimating how many employees a business requires. Another common concern is money. It is important to create a budget when selecting a franchise, but with so many different types of fees, it can be difficult to plan out your spending. Keep reading to learn about the most common franchise fees and why they exist.
What are initial franchise fees?
Initial franchise fees are one-time payments paid to the franchisor from the franchisee to acquire the licenses and rights to the brand. They typically run between $20,000 and $50,000, but master franchises can run $100,000 or more.
What are royalties?
Royalties are continuous payments made to the franchisor by the franchisee. Royalties are typically a percentage of gross or net revenues that the franchisee earns. For the most part, they are paid/calculated on a weekly or monthly basis.
What are marketing fees?
Marketing fees are payments that enable franchisors to provide marketing materials to franchisees. It is crucial that every location has the same/very similar marketing to increase brand recognition. For example, when you are driving down a highway and see a billboard with the McDonald’s logo, you know that there is a location nearby with the exact same menu as the one in your town. The same is true with any franchise; standardized marketing is absolutely necessary.
The marketing fees can help cover the costs of a corporate marketing team and the development of marketing materials such as apparel, brochures, and maintenance of a website.
What are training fees?
As the name suggests, training fees are the fees associated with training franchisees to ensure that they are confident and comfortable owning a franchise location. It may also cover the cost of additional training throughout your time as a franchisee, such as yearly convention costs, should your company require them.
So, what are all the most common types of franchise fees?
Overall, the most common types of franchise fees are:
- Initial fees
- Ongoing royalties
- Marketing fees
- Training fees
Are there any additional costs of opening a franchise?
There are a few additional costs to opening a franchise. To begin, you might be required to hire a lawyer to review the franchise disclosure agreement (FDD). You may also need to hire an accountant to help manage the finances of running a franchise. There may be more additional costs depending on your and the franchisor’s preferences.
Brick-and-mortar franchises have many more additional costs than mobile franchises. With a brick-and-mortar franchise, you have to buy/rent a space to open a physical store. You also encounter higher overhead costs than a mobile franchise would have.
What is a Franchise Disclosure Agreement (FDD)?
A Franchise Disclosure Document is a legal document created by the franchisor to give prospective franchisees an overview of the agreements that they will have to sign, the franchise itself, and more information about the franchisor. There are typically 23 sections, called items, that describe everything a franchisee would need to know. In most cases, prospective franchisees hire a lawyer to look over it so that they can better understand the document.
Do I have to have a certain amount of capital to acquire a franchise location?
For many franchises, you have to have a certain amount of liquid capital in order to be considered to become a franchisee. This ensures that you have the resources to successfully invest in a franchise. Franchises often have additional costs, as mentioned above, and this guarantees that you can cover these.
How do PorchPros’ fees compare to other franchises’ fees?
At PorchPros, we have relatively low fees compared to businesses in the home improvement industry. They are all listed in our Franchise Disclosure Document (FDD).
An advantage of a mobile franchise like PorchPros is that since you won’t have a physical store, you cut almost all overhead costs, as mentioned earlier.
Ready to learn more about becoming a PorchPros franchisee? Fill out our contact form! We would love to get in touch with you!