Understand that every
franchise will carry some initial start-up cost. The money may either go toward
the franchisor, but the costs may also include the amount of money necessary
to begin the business. This includes utility bills, rent on the unit or
property, supplies, and other business-related expenses.
On top of that, many franchisors will charge franchisees royalty fees,
a monthly cost based on a fixed percentage or a proportion of the sales.
The idea is that the more money that the franchise makes, the franchisor
will also benefit from this.
What Do You Get from Royalty Fees?
What does a franchisee get from paying royalty fees? The most prominent
and established businesses require franchisees to pay royalty fees. There
is some security knowing that you are managing a franchise that is already
well-known and on the tip of everyone’s tongues. Furthermore, the
franchisee has essentially joined that franchisor’s family, and
thus is given all the privileges of using those trademarks and proprietary
tools or equipment.
The additional benefits that royalty fees provide to franchisees include:
Franchisees can be given more help upon the startup of the business, such as:
- Store location
- Computer software
- Training for employees and managers
- Marketing for the grand opening
- On-site visitations
- Day-to-day and ongoing operations
- Touching base to assist in running the business
- Ongoing marketing of the business
- Updating training procedures and business methods
The royalty fees and initial start-up costs will vary for each company,
so there are not across the board standards. This will be critical in
making your decision to franchise or not, so it is best that you understand
all of the terms of the contract before diving in. Our Los Angeles franchise
lawyer can assist you with reviewing these contracts.
Speak with a Seasoned Franchise Lawyer Today!
At Franchise Legal Support, our leading attorney, Mr. David Levaton, has
worked as an owner and operator of a multi-unit franchise operation while
also running his own legal firm. He has first-hand experience in these
facets of franchising. Knowing that you may have many questions about
how to begin your franchising endeavor, Mr. Levaton can help break down
some of the complex legal language so that you do not feel overwhelmed
by the contracts and other franchise agreement terms.
Be sure to contact us today if you have any questions about how to begin.
Call (888) 631-0048 or fill out our
case consultation form to make an appointment.