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What fees can I expect when starting a franchise?

On Behalf of | Apr 18, 2021 | Blog, Franchise Law |

If you’re looking for a new career, a way to earn extra money, or both, you might consider buying a franchise in Florida. Before making this type of decision, it’s a good idea to learn about franchise fees. These are fees you must pay to become a franchisee. With that in mind, here’s a closer look at what fees to expect when starting a franchise.

Initial franchise fee

Every person wanting to become a franchisee must pay an initial franchise fee. This initial fee is part of the FTC Franchise Rule. This franchise fee pays for the use of a company’s intellectual property, including a brand’s trademarks, logos, and products. In most cases, this is a non-refundable payment. It’s a good idea to research which companies want their franchise fees in full and which businesses agree to installment payments.

Advertising fees

You might be unaware that you’ll also need to contribute to a franchisor’s funds for marketing and advertising. Typically, this fee ranges from 1 to 2% of your store’s monthly earnings. If you feel that you’re paying too much to advertise this franchised business, you might want to contact a franchise law attorney.

Royalty fees

Lastly, franchisees will need to pay royalty fees while operating a franchise. These fees are often ongoing and allow you to pay for continual support from the franchisor. Royalty fees are often based on a certain percentage of your location’s gross sales. This means that you will pay more royalty fees as your store’s gross sales increase. However, not all franchisors have the same rules about royalty fees. Certain franchisors lower your royalty fees when gross sales totals increase.

Before you enter into a franchise, it’s wise to understand your initial and ongoing costs. By doing research, it’s possible to enjoy a profitable and successful career as a franchisee without paying unfair fees.