The Price of Doing Business The Costs and Value of Franchise Fees
Franchise skeptics often believe franchise fees are “too high.” They imagine they can make the same amount of money without the help of an established brand and are better off flying solo. In truth, they’re missing out on a substantial investment opportunity. The term “franchise fees” usually refers to the fees charged at the beginning of the franchisor-franchisee relationship. They’re a one-time upfront cost, typically starting at $20,000, and can increase substantially. Franchise fees permit you to use the company’s systems, processes, and marketing, alongside other perks of owning a franchise. They pay for the franchisor’s upfront costs of onboarding your business and are only a fraction of total startup costs.
franchisors charge. Marketing fees are recurring fees calculated as a percentage of monthly revenue. These fees usually go directly to the franchisor, but sometimes, they’re collected by a regional cooperative. The marketing fee rate is usually 1%–5%. That might sound like a lot to the uninitiated, but if your franchisor is holding up their end of the bargain, you should be getting your money’s worth and then some. After all, widespread brand recognition is one of the top reasons people enter franchising. Some franchisors also charge operational fees to pay for technology or support. They should provide a tangible value to your business, not be a source of revenue for the franchisor. Franchisors don’t make money based on any of the above fees. Their profit comes from royalties. Royalties are the largest overhead cost franchisors directly charge to the franchise.
Franchisors usually calculate royalties as a percentage of revenue, and the amounts can range significantly. High-volume businesses with higher revenues (like quick-serve restaurants) usually have a lower royalty rate, while lower-volume franchises typically pay a higher percentage to their franchisor. Those who feel royalties and other franchise fees are “giving money away” fail to understand the basics of the business model. Franchisors only profit if their franchisees make money, incentivizing them to keep fees as low as possible. Further, entrepreneurs partner with franchises because they get more out of the agreement than they give. When someone’s franchise fees are “too high,” it’s usually because they picked a subpar franchise or are in the wrong line of business.
But experienced franchise owners know that “franchise fees” are not the only fee
TASTY SPINACH ARTICHOKE DIP
TAKE A BREAK
Celebrate Earth Day by eating a tasty and healthy snack — spinach artichoke dip!
Ingredients: • 8 oz spinach leaves •
8 oz cream cheese, softened
Inspired by DinnerAtTheZoo.com
• •
1 cup sour cream
3/4 cup chopped marinated artichoke hearts
• •
1/2 cup grated Parmesan cheese 1 1/2 cups shredded mozzarella cheese, divided Sliced bread, crackers, or tortilla chips for serving
• • •
1 tsp minced garlic
1/2 tsp salt
•
1/4 tsp black pepper
Directions: 1.
Preheat oven to 375 F. Coat a small baking dish with cooking spray. 2. In a medium pan, steam or sauté spinach until wilted. When spinach cools, wring out excess water, then chop coarsely. 3. In a large bowl, mix cream cheese, sour cream, spinach, artichoke hearts, garlic, salt, pepper, Parmesan cheese, and 3/4 cup of mozzarella cheese. 4. Spread the mixture onto the prepared baking dish. Top with remaining mozzarella cheese. 5. Bake for 20 minutes or until the dip is bubbly. Turn the oven to broil and cook for an additional 2–3 minutes so the cheese will begin to brown. 6. Immediately serve with bread, crackers, or tortilla chips.
Solution:
3
206-903-0401
Made with FlippingBook Ebook Creator