Franchise 101: What is a Franchise Fee?
When considering investing in a franchise, you might ask why you would pay a franchise fee. This is a common question I get as a certified franchise consultant (CFC) all the time. A franchise fee is a one-time fee charged to a new franchisee when purchasing a franchise. Franchise fees can range from a few thousand dollars to more than $50,000 and are usually paid at the time of signing a franchise agreement. In most cases, the franchise fee is non-negotiable, at least in the case of single-unit franchises.
As a CFC, I am trained to educate investors exploring franchise opportunities on what the franchise fee covers and why it's important. The most common benefits that may be offered by a franchisor in return for a franchise fee are:
- Inclusion in the system
- Rights to use a franchisor's brand name, trademarks, and marketing materials
- Comprehensive training and mentorship
- Access to proprietary systems and business processes
- Rights to use negotiated vendor products and services
- Operations manuals
- Location selection and build-out assistance
- Grand opening campaigns
- Computers, software, and supplies