Expanding your business by franchising can be a lucrative business if done right. Most people have questions about how much the cost is to franchise your business.
This article will cover the details on the cost to franchise.
There are a few terms that you should be familiar with to understand franchising.
Franchisor – This would be you, you would be the home office.
Franchisee – This is the person that buys your franchise
Franchise Fee – This one time up front fee is the fee that a franchisee pays to the franchisor (you) for the right to own the franchise and for the help to get started. Typical franchise fees range from $25k to $40k.
Franchise Royalty – This is an ongoing fee that the franchisee pays to you (franchisor) each week or each month. This fee is usually a percentage of the gross revenue and ranges from 6-10% of the gross revenue. In return for this fee you would provide ongoing support to the franchisee.
The cost to franchise a business will vary slightly depending on how much work needs to be done, what industry and what state you are in.
There are a few different fees involved with franchising your business.
1. The up front fee, this fee covers all of the initial setup of legal documents, disclosure documents, contracts, operations manual, sales plan & marketing plan. This one time up front fee ranges from $27k to $35k.
2. Performance based selling program, this is where we help you sell franchises of your business and are paid a fee when a franchisee buys. We collect 30-40% of the franchise fee and you retain the other 60-70%.
3. Ongoing royalties, we collect a 2% royalty fee for 5 years on each unit that is sold. So if your royalty is 8%, you would get 6% and we would get 2% for 5 years on each unit, after that unit has been open for 5 years you would get all 8%.
These fees allow us to provide all of the up front and ongoing legal, marketing & sales support to help you sell a lot of franchises.
Interested in having us evaluate your business for free to see if it qualifies for expansion through franchising?
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