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Franchise Fees Produce Income, but be Careful
Written by: John PowerArticle Overview: When you receive a franchise fee you take on the obligation to train the franchisee, mentor them, and do almost everything possible to help them. However, income from franchise fees can be substantial!
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Franchise Fees Produce Income, but be Careful
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.
More information can be found at: www.biltmorefranchise.com
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Article Tags: doing business, franchise fees, franchise organization, franchise system, franchisee, franchisees, franchisor, initial fees, initial franchise fee, jump start, long term relationship, long time, time and money
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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: What are your success criteria?
- [quote="DwayneGarrett":1igrdgib]Out of curiousity, what has to be present for you to know that your business is a success?
The top three things for me are:
1. Maintaining a 6 figure income year in and year out.
2. Creating and promoting my own products.
3. Income not solely dependent upon my personal effort.
How about yours?[/quote:1igrdgib]
I would have to say mine were:
1. Monthly Residual Income that exceeds all expenses by 110%
2. Free time to create and promote my own products (relies on #1)
3. 5% of all revenues generated by my team going to feed starving kids
Now that is "feel good work".
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