What is the average franchise fee

Ultimately, this will allow you to profit from your royalty fees, rather than allocating those dollars to growth initiatives. Requiring franchisees to pay a national advertising fee can help build brand awareness, create programs for franchisees, and provide the ability to rally resources if necessary — for example, if there is a major competitive intrusion.

Most franchise organizations 72 percent currently charge a national advertising fee. Of those brands, 89 percent charge a percentage of sales, while 11 percent charge a fixed dollar amount. Across all verticals, the average national advertising fee is 2 percent of monthly revenues.

Fewer franchise brands require a local marketing spend. Just over half of franchise organizations — 55 percent — require this fee, while 45 percent do not. Of those that do require it, 79 percent require a percent value of revenue, rather than a fixed dollar amount.

To grow your franchise brand, you must ask yourself: Do your current fees allow you to effectively compete in your vertical? Based on our research, 80 percent of survey respondents say the marketing fees they currently charge are not enough to allow them to compete. Consider a new approach to these fees that provides the resources to effectively compete on national and local levels. Some franchise organizations also require franchisees to pay a technology fee, which contributes to the purchase or licensing of software , hardware, and networking equipment necessary for store operations.

Only 61 percent of franchises collect technology fees, and typically, they charge a flat rate, rather than a percentage of revenue. If so, you may be missing a major growth opportunity. Half of franchisees say that technology tools are among the top value that a franchisor can provide.

And franchise organizations that charge technology fees are likely to grow 36 percent faster over a two-year period than those that do not charge a technology fee. This has the potential to increase order size, speed up the ordering process, and provide a better customer experience. Appropriate technology fees can equip your franchisees to be more efficient, deliver better service, and compete more effectively with others in your vertical. In fact, appropriate franchise fees can attract more highly qualified franchisee candidates — because they will recognize that your franchise is primed for growth.

His focus is on helping franchisors to get to their desired future state in sales, operations, and marketing. Recognized in franchising circles for his extensive leadership experience, and ability to drive execution, Keith is a highly rated keynote speaker and author.

He has had the rare opportunity to create several leading franchise systems from inception through launch and sustained growth into successful enterprise level brands. Privacy Policy. Oct 29, Initial Franchise Fees Initial franchise fees vary from company to company. Royalty Fees Royalty fees extend beyond the initial franchise fees.

National and Local Marketing Fees Requiring franchisees to pay a national advertising fee can help build brand awareness, create programs for franchisees, and provide the ability to rally resources if necessary — for example, if there is a major competitive intrusion. Technology Fees Some franchise organizations also require franchisees to pay a technology fee, which contributes to the purchase or licensing of software , hardware, and networking equipment necessary for store operations.

Are you undermining your system by foregoing this fee and not investing in technology? Previous Blogs. Oct 22, Oct 14, Oct 07, Sep 25, Aug 18, Aug 10, Jul 21, Jul 02, May 04, Apr 07, Will you be ready for the recovery? The sort of good news is that franchise fees are typically just a one time payment. Different franchises have different expenses associated with onboarding you, which is why franchise fees will vary from brand to brand. In theory, the franchise fee is not supposed to be a profit center for the franchisor the royalty is , but rather an estimate of the expenses associated with getting you up and running.

For example, the support and training necessary for you to get your business up and running may be very little for something like a travel agency, whereas a trampoline park requires much more hand holding due to the scale of the business and safety precautions. Are you getting enough in return to make it worth it?

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