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What Does The Initial Franchise Fee Cover?

Written by: Candice Clem

Article Overview: Franchising can be a confusing new world for anyone looking into starting a new franchise. One of the most important things to know, however, is what you actually get for the money you invest in your franchise fee. If you'd like to know what's included in the typical franchise fee, keep reading.

What Does The Initial Franchise Fee Cover?

Starting a new small business franchise can be one of the most exciting and profitable moves for any budding entrepreneur, but before you make the big leap into a new business, it’s important to know as much as possible about the fundamentals of franchising. If you’ve spent any time looking into the benefits of a franchise, you’ve undoubtedly seen the statistics which show that franchises are nearly twenty times more likely to survive past the 5 year mark when compared to a small business startup. Additionally, franchises have been one of the only types of businesses to show growth in the midst of our current recession.

So what do you need to know before starting a small business franchise? While the most important part of selecting a franchise is choosing the business that excites you and will work best for your circumstances, another important aspect of a franchise is the initial franchise fee. Every franchise requires an initial franchise fee, but it’s important to know what this fee includes and how much it will cost, which varies greatly from franchise to franchise. Here’s a look at some of the key components included in the average franchise fee.

What’s In A Name?

When you’re starting a small business, one of the most difficult aspects can be building a client base and gaining the trust of the people in your area. One of the quickest and easiest ways to accomplish this is to open up a franchise with a well established name. This is quite possibly the most important item included in the franchise fee and will usually make the difference between a $10,000 franchise and a $1,000,000 franchise. While a big name can help generate quick and sustainable profits, lesser known franchise names also have some advantages. If you’re planning on starting a junk removal small business and decide to go with a 1-800-GOT-JUNK small business, you’ll benefit from a name that’s also the company’s phone number, which will go a long way in helping your clients remember your name and your phone number.

Won’t You Please, Please Help Me

When you start a small business, often the goal is to gain financial independence and to "be your own boss", but going it alone can a quite a daunting task, particularly if you’ve never owned or operated your own small business before. This is one area where franchises really do offer the best of both worlds. Included in your franchise fee with nearly every franchise is the support you will undoubtedly need to run a successful business. From the initial training, ranging from as little as a couple days, to several weeks in some cases, to the ongoing support and training tools offered by each franchisor, with a small business franchise you’ll definitely feel supported and you’ll always have all of your questions answered.

The Inside Information

One of the toughest parts of starting a typical small business is learning all of the intricate details associated with that particular business. Many successful entrepreneurs have had experience in the business that they choose to pursue, so this makes it a bit easier on them. But what happens if you’re starting a business in a field that you have absolutely no prior experience in? This is where a franchise can really come in handy. Not only does your franchise fee include the equivalent of a copy of the franchisors proprietary operations manual, but you’ll also gain access to the franchisors suppliers and list of clients and business partners. These types of lists can take the average small business startup years, if not decades, to compile, and having inside access to the franchisors suppliers will also often equate to lower costs for products that any small business can manage to achieve.

While some franchise fees may not include some of the items listed above, and some may include quite a bit more, the point of it all is that it’s important and beneficial for anyone considering a franchise to thoroughly investigate the franchise in questions prior to making the commitment. Most franchises make great businesses and provide plenty of income potential, but finding the right one for you and your needs is the name of the game when it comes to selecting a franchise. When you get closer to making your decision, make sure you take the time to ask the franchisor what all is included in their franchise fee, and whether it ends up being more money than it’s worth, or a screaming bargain, you’ll have the information you need to make the right decision.

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Article Tags: business franchise, circumstances, entrepreneur, franchises, initial franchise fee, junk removal, leap, midst, new business, phone number, profits, recession, small business startup, starting a new small business, starting a small business, statistics, twenty times, types of businesses



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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