Be Careful How You Take Franchise Fees!
Sounds like a problem you would like to have, right? Too many people trying to give you money.
Well, in franchising, it is important to be careful who you take franchise fees from. Each time someone pays you a fee, you enter into a long-term relationship in which you need to do your best to help them be successful.
Here are some questions to ask yourself before you receive a franchise fee: What is the source of their funds? Who will actually own the franchise? Can I picture myself doing business with this person for a long time? Do I like them? Is this person like others in my system who are successful? Is this person generally positive, or negative, about life? What are their true chances of success? Are they realistic about what the program can do for them?
Sometimes it is difficult not to take every fee opportunity, but if you are somewhat selective about who you accept into your franchise system you are likely to have a higher percentage of franchisees who are successful.
In fact, if you don't turn people down, who are ready to give you the franchise fee, you are probably accepting franchisees that may not be a good fit for your franchise organization.
Before taking that fee think about your obligations and the long-term relationship that you are about to experience.
But, take those initial fees, from the right candidates!
What is the purpose of the initial franchise fee, and how is the money allocated?
The initial franchise fee compensates the franchisor for the knowledge, experience, support, and brand that are provided to the franchisee. We ask clients, "If someone were to start a business like yours, how much time and money would it take for them to learn what you know?" Most roll their eyes at the thought! Franchisees are willing to pay something less than this amount for a "jump start" along with ongoing assistance.
The initial franchise fee reimburses you for the cost of developing your franchise program, pays for the cost of making the sale (advertising and commissions), reimburses you for training and start-up support, and includes some profit as well. Helping you determine the amount of your franchise fee is part of our Strategic Planning service, and we will be happy to provide franchise fee research.
Franchise Fees Produce Income, but be Careful - To learn more about this author, visit John Power's Website.
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John Power
(Visit John's Website)
John Power, founder of Biltmore Franchise
Consulting, has extensive experience
developing and marketing businesses and
business opportunities. He has been in and
around franchising for over twenty years.
From 1980 through 1990 he conceptualized,
organized, and developed the American
Video Association. He grew AVA to 2,000
national members, before selling the
company it 1990. It was later merged into
another home video marketing company.
From 2000 to 2005, due to the nationwide
economic recession, he worked as a
contract marketing and human resources
consultant to several local and national
companies.
In 2005 Mr. Power began working as a
franchise development consultant on a
full-time basis. Since that time he has
helped more than two dozen companies
initiate and develop their franchising
program. He notes that there are many
companies whose owners are interested in
developing a franchise program, and who
need his specialized assistance.
Mr. Power is a “hands-on” franchise
consultant. He said, “I am the ‘nuts and
bolts’ person who puts this all together
for my clients.”
Mr. Power holds a B.S. degree with a major
in Marketing.
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