Franchising 101
1. FRANCHISE FEES
The franchise fee is a one-time payment that a franchisee makes to the franchisor for the right to use the company's brand, products, and intellectual property. Many times this also includes the rights to a secured or protected territory. The franchise fee is included in the total investment costs.
2. THE TOTAL INVESTMENT RANGE
The total investment range includes the franchise fee and any / all costs associated with getting your business up and running. Typically, the investment range also provides working capital for your initial 3 months of business.
3. WHAT ARE ROYALTIES?
Every franchisee pays royalties, which are an ongoing % of gross revenue. Royalties are collected by the franchisor to help maintain the system that the franchisor has built. Royalties can range anywhere from 4% to 12%, with the average being 6% to 8%.
4.WHAT IF I DON'T HAVE EXPERIENCE?
Directly applicable experience in the industry is not required for the concepts presented. Included in the total investment range is training. The franchisor will train you 100% on successfully operating the business. That is one of the benefits of franchise investment. You are in business for yourself but not by yourself.
5. HOW MUCH MONEY CAN I MAKE?
It's natural to want to know the return on investment (ROI). One stage in the discovery process is called "Validation." This is where you will be able to speak with other franchise owners to understand the financial opportunity of the business. The Federal Trade Commission (FTC) prohibits me from making any financial claims as a franchise broker and the Franchisor.
6. The FDD
The purpose of the Franchise Disclosure Document (FDD) is to provide prospective franchisees with information about the franchisor, the franchise system, and the agreements they will need to sign so they can make an informed decision. You will gain insight into the FDD further into the process