Why Pay a Franchise Fee?

Franchising is a strategy that the Franchisor uses to achieve market expansion and market domination. Franchises are granted or awarded to a qualifying Franchise Candidate that has similar objectives in their own marketplace. That Franchisee will have the responsibility to fully implement the operating and marketing systems of the Franchisor in their defined area. Good Franchise systems will recognize their Franchisees as strategic-partners, meaning they are in a partnership that is aimed at achieving unified goals.

Developing a product or service, the brand, sales and marketing tactics and other business operating processes take trial and error, money, and time. The Franchisor has spent that time and money developing an efficient and completely turnkey business and franchise system.

The Franchise Fee is the cost of putting the Franchisee into the business as a partner and participant in this turnkey franchise system. These costs include:

  1. The development costs of all of the elements of the Franchisor’s system as explained above
  2. Training the individual Franchisee to use those system elements and programs
  3. Marketing and advertising to source Candidates
  4. Costs of qualifying Candidates including rejecting many unqualified Candidates
  5. Salaries, travel, & administration of Franchisor employees, etc.
  6. Legal expenses to draft agreements defining the methods & terms for the Franchisee to participate

The Franchise Fee is the Franchisor’s assessment to cover these costs.

If an individual were to start an independent business, it would take substantial amount of time, money and trial and error to develop the product or service, the brand, sales and marketing tactics and other business operating processes to make the business successful. This amount of investment over a period of time is likely to be substantially more that the franchise fee that one would pay in order to own a slice of a successful, turnkey system.

Paying a Franchise Fee is essentially saving both time and money.