Franchise Payments Franchisees can expect to pay

Not surprisingly, there are more payments related to owning a franchise. As dictated by the Federal Trade Commission (FTC), franchisors must list the fees in their franchise agreements. The following are the primary payments that will be listed:

Initial Franchise Fee: Franchisees pay the fee for the right to use the franchisor's brand, products and / or services. These franchise fees, which are essentially paying for the operating systems set / brand awareness, can range from under $ 10K to over $ 100K.

Legal Fees / Accounting: Lawyers need to review the franchise agreement in order to create a legal entity for the franchise (ie a corporation, LLC, etc.), and auditors need to review the financial statements of the franchisor.

Liability, Property / Casualty and other insurance: Make a copy of insurance requirements of the franchisor (listed in their UFOC) and fax them to your broker for rate quotes if you want to get an idea of ​​what it will cost the insurance. If you have employees, you may be required to offer disability and life insurance with additional benefits for employees, such as retirement plans.

Salaries of employees: make a profit can take up to three years, make sure you know what you need for the salaries of its employees at that time.

Building and Equipment Costs: Building / shop fitting costs vary substantially depending on the type of business you are opening. The costs are almost certainly more if you are trying to build a business from scratch if you are simply setting up an existing path. However, even in the latter case, you will need ventilation, furniture, furniture / seating, facilities / equipment, lighting, signage and toilets.

Rent and security deposits: You must pay these fees if you rent space for your business.

Equipment and software updates: the franchisor may require equipment and software upgrades provided, which should have paid.

Royalties: franchisee must pay royalties to the franchisor. These fees are usually monthly, and can range 4-8 percent of total sales of an affiliate.

Advertising Costs: A number of franchisors require franchisees to contribute to an advertising fund, which funds local to the national advertising campaigns, commercials and other promotions. Some franchisors have co-op programs in which the franchisor pays a portion of the costs, allowing affiliates to pay for the rest of the case .......