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.
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.
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%.
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.
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.
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