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    Chapter 8 - The Fees

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    Jia Wen 2
    This chapter discusses various fees franchisors charge franchisees, including initial franchise fees paid upon signing to cover training and startup costs, ongoing royalty fees which are usually a percentage of gross sales, and advertising fees which are also a percentage dedicated to cooperative advertising. It also notes additional fees such as training, consulting, deposits, grand opening support, accounting services, and renewal fees. The document explains how franchise fees are calculated based on factors like goodwill, territory value, brand name, and expected profits.

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    Chapter 8 - The Fees

    Uploaded by

    Jia Wen 2
    75 views13 pages
    This chapter discusses various fees franchisors charge franchisees, including initial franchise fees paid upon signing to cover training and startup costs, ongoing royalty fees which are usually a percentage of gross sales, and advertising fees which are also a percentage dedicated to cooperative advertising. It also notes additional fees such as training, consulting, deposits, grand opening support, accounting services, and renewal fees. The document explains how franchise fees are calculated based on factors like goodwill, territory value, brand name, and expected profits.

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    CHAPTER 8 - THE FEES

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    This chapter discusses various fees franchisors charge franchisees, including initial franchise fees paid upon signing to cover training and startup costs, ongoing royalty fees which are usually a percentage of gross sales, and advertising fees which are also a percentage dedicated to cooperative advertising. It also notes additional fees such as training, consulting, deposits, grand opening support, accounting services, and renewal fees. The document explains how franchise fees are calculated based on factors like goodwill, territory value, brand name, and expected profits.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    75 views13 pages

    Chapter 8 - The Fees

    Uploaded by

    Jia Wen 2
    This chapter discusses various fees franchisors charge franchisees, including initial franchise fees paid upon signing to cover training and startup costs, ongoing royalty fees which are usually a percentage of gross sales, and advertising fees which are also a percentage dedicated to cooperative advertising. It also notes additional fees such as training, consulting, deposits, grand opening support, accounting services, and renewal fees. The document explains how franchise fees are calculated based on factors like goodwill, territory value, brand name, and expected profits.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 13

    CHAPTER EIGHT

    THE FEES – FRANCHISE FEE,


    ROYALTIES AND
    ADVERTISING FEE

    03/05/23 1
    CHAPTER OBJECTIVES
    • To identify several fees / payments in
    franchise business system.
    • To discuss how franchise fee is calculated.

    03/05/23 2
    (1) INITIAL FRANCHISE FEES
    • The initial franchise fee is paid by the franchisee
    upon signing the franchise agreement.
    • The initial franchise fee normally covers the initial
    training of the franchisee and other services
    provided by the franchisor, which enables the
    franchisee to get up and running.
    • The amount of the initial franchise fee is set by the
    franchisor to cover the costs it incurs in putting the
    franchisee in business.

    03/05/23 3
    (2) ROYALTY FEES
    • The royalty fee is the fee that becomes payable on an
    ongoing basis once the business is opened.
    • The royalty fee is paid either weekly or monthly by
    the franchisee to the franchisor.
    • It is usually a percentage of gross sales; however,
    sometimes it is a fixed amount. For example, if your
    royalty fee is 5% then for every dollar of sales that
    you have in your fran­chise business, you will send five
    cents (or 5% of each dollar) as an ongoing royalty
    payment to the franchisor.
    03/05/23 4
    (3) ADVERTISING FEES
    • Advertising fee is based upon a percentage of
    gross sales or net sales and range from 1% to
    5%.
    • An advertising cooperative is comprised of a
    group of franchise units (and com­pany units)
    of a franchise system who contribute money
    to the cooperative for it to engage in
    advertising on behalf of the group.

    03/05/23 5
    (4) TRAINING FEES
    • Training fees are the fees that a franchisor
    charges to train you in the franchise business
    so that you will have the knowledge necessary
    to operate a unit success­fully.

    03/05/23 6
    (5) CONSULTING FEES
    • If a franchisor provides consulting services in
    connection with the operation of your
    franchise unit, then there will be an additional
    fee such as site selection assistance fees
    leasing fees and auditing fees.

    03/05/23 7
    (6) UP-FRONT SECURITY DEPOSITS
    • If you lease your equipment, signage,
    buildings, or land from the fran­chisor,
    frequently you are required to pay an up-front
    security deposit to the franchisor.
    • Normally, the security deposit is payable back
    to you if you have met the terms and
    conditions of your lease agreement.

    03/05/23 8
    (7) GRAND OPENING FEES
    • Usually the franchisor will sup­ply staff and
    promotional materials for the grand opening.
    • For these services the franchisor charges a
    fee, which is based upon how much it
    provides for the grand opening in the form of
    staff and services.

    03/05/23 9
    (8) Accounting, Data Processing,
    and Bookkeeping Fees
    • If the fran­chisor provides you with any services
    in the areas of accounting, data processing, or
    bookkeeping, then it will charge you a fee
    based upon the amount of service provided.
    • On-site management assistance fees: Most
    franchisors make provisions for providing on-
    site management assistance if a franchisee so
    requires.

    03/05/23 10
    (9) OTHER FEES
    • Application fees: Some franchisors charge a set fee
    that must be paid just to fill out an application.
    • Guarantee fees: This is a fee charged by the
    franchisor to insure the execution of the franchise
    agreement.
    • Exclusive territory fee: Fran­chisors that do provide
    an exclusive territory will probably charge you a fee.
    • Renewal fees: Franchisor charge a renewal fee to
    renew your franchise agreement for an additional
    period of time.
    03/05/23 11
    HOW FRANCHISE FEE IS
    CULCULATED?
    • the value of goodwill
    • the value of the franchisee's territory
    • the cost of identifying and training franchisees
    • location assistance
    • the longer of franchise contract
    • the value of the system brand name
    • the production process
    • franchisee profiles
    • outlet profit margins
    03/05/23 12
    Recap………………
     There are several fees will be charged to the potential
    franchisees
     The most important fees charged by the franchisor are
    initial fees, royalty fees and advertising fees.
     There several factors influence the determination of
    franchise fees.

    03/05/23 13

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