Why Pay a Franchise Fee?

Why Pay a Franchise Fee?

So you’ve decided to look into businesses and are considering buying a franchise instead of starting your own business without the guidance and direction of a franchisor.  The first question you most likely have is why pay a franchise fee and add additional expense to your start up investment in the new business? Maybe you’re asking yourself what the franchise fee is for and why it is necessary for you to pay it. There are many benefits to the franchise fee and what it offers you and in most business decisions, the old saying “it takes money to make money” certainly holds true with the franchise fee as well. Take a look below at the many benefits you receive when you pay the franchise fee for your new location and I think that if you are considering the right franchise with the appropriate value proposition, a franchise fee is a valid expense for a new business start up.


Resources available at Your Fingertips

When you pay the franchise fee it is for a wealth of resources right at your fingertips. Part of the beauty behind a franchise opportunity is that it is already proven to work and should have validation behind the business model. It has a business model in place that is proven to be successful and now they are sharing this with you, in effect you should be getting a blueprint for success with a good franchise model. The resources you gain for your franchise fee include items such as initial training, support, guidance and ongoing coaching needed to be successful in your new business venture.  If you compare the expenses of hiring a qualified business consultant to support your growth, generally they are in line with the cost of a franchise fee.  In addition, you gain rights to the trademarks, patents and intellectual property the franchisor has that you want in your new business.  Franchise fees can also provide some tangible items such as software, technology, marketing materials and other aspects.   


Training and Support

Although you will now own your own business, you do need training and business support for the franchise location in order to receive the benefits of franchise ownership versus general business ownership. This is another benefit you receive from your fee paid is the time, effort and resources spent on your behalf to train and provide you with the expertise needed to shorten the learning curve in your new business. You will receive training for everything from the back office operations to the frontline customer service policies and procedures. You’ll learn everything there is to know about running this franchise and also your employees will be thoroughly trained as well.  Good franchises will have a solid ability to transfer ownership of expertise and will effectively “train the trainer”.  You also receive ongoing support after the opening of your franchise to help you see continued success in the location.


Dedicated Support

The franchise fee also allows you as the business owner access to resources that are set up and dedicated to your continued success in the ownership of your new location. Having support when you’re starting out in a business is very important to your success. Paying the franchise fee gives you that critical support you need to make sure everything goes off without a hitch. Your franchise fee goes for so much more than just buying your way into the company. Do not think of it as that. It is the key to having the support you need on an ongoing basis. This support makes it possible for you to see success in all you do with the company. You’re embarking on a brand new journey and it is a great road ahead with the support you receive from the brand you’ve chosen.


If you’re thinking of going into the franchise business, remember that you have a world of opportunities out there. Be sure that you check into the franchise fee and how much it will be, but don’t gauge the value of the franchise fee until you understand what comes with the franchise and whether the services offered warrant the fee requested. Many times you can incorporate the franchise fee into business loans such as SBA loan.  We recommend speaking with other franchisees of the system you are considering and ask them point blank whether they feel the franchise fee was worth the expense.


If you are considering franchises and looking into different franchise models and would like to better understand why you should pay a franchise fee or what franchise fee makes the most sense, feel free to contact us for support and franchise consulting:

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What Makes the Most Profitable Franchise in Today’s Franchise Market?

The Franchise market in the U.S. alone boasts over 3,500 franchises and in many states, the true number of franchise opportunities is unknown.  For a buyer working through the decision-making process as to what the best franchise investment might be, this can be a daunting task.

It starts with determining your own skill set and abilities, what have you done in the past that could be leveraged in a new franchise business, what skill sets are you strong in and could be a benefit in the new business, and what would you like to get out of a franchised business investment? 

In most cases, it makes sense to ask someone else to provide an assessment of your abilities, it can be difficult in most cases, to be honest, and without bias.  There are great tools out there which can provide a personality test or professional skills review for you.

Once you have your personal assessment together, you can begin to research which business models fit your profile best.  Some franchise businesses require salesmanship and the ability to be comfortable prospecting for customers while others need an owner operator who has been in retail and managed staff effectively in the past. 

If your evaluation is accurate, you will be able to narrow down your selections of franchise industries and be able to determine which categories might make the most sense for you.  When looking for the most profitable franchise, it is important to recognize that the franchise itself does not inherently produce profitability, regardless of how great of a business model it might be.

It is the combination of a good market, good business model and a good operator that makes franchise systems profitable at the unit level.

Now that we have narrowed down our industries, it’s time to review the market segment.  There are several ways to look at “market”, one is the area where you would be operating the business and what customers you would be providing the goods or services to.  You should do extensive research on your area and determine whether that market has the right demographics, income levels and population density to support the franchise businesses you are considering.

Use online data to start your research, sites like www.Score.org are a good start, then get specific with direct research by interviewing business owners and professionals who would have relevant experience related to the business in that market.  The second “market” is the overall industry you are considering entering with the franchised business, food service, cleaning or accounting would be considered in this category. 

You now need to research the potential growth for your industry, competition, and market trends….how will technology affect this industry?  All of these elements could make your franchise more or less profitable and if you don’t do the planning prior to your franchise purchase, you could unknowingly be making the wrong move.

Now it’s time to research the franchises themselves.  You should have a list of at least three concepts that interest you and warrant additional research.  Start by researching any available data on the franchise brand, what has worked, what hasn’t, why have there been failures in the market, and why have some franchises succeeded. 

Review the FDD in detail, and read all 23 Items and the exhibits to the document including the Franchise Agreement and Financial Statements.  Ask the franchisor about every question that comes to mind and take good notes. 

Towards the end of the FDD are other franchisees who are either in the system or have left the system, take the time to call and interview them about their experience with the franchise brand. 

Compile your data and compare the brands to one another, then do the gut check as to which franchisor you feel the most comfortable working with and who you could envision yourself “married” to.

At that point, you have most likely discovered the Most Profitable Franchise.  I’m sorry it isn’t a one-word answer, but if you take the time and invest in the process of researching the right franchise, you certainly have the best opportunity to realize a good return on your franchise investment.

For more information on how to buy a franchise, Contact Us.