INITIAL FRANCHISE FEE
- This is a one-time payment that the franchisee makes when signing the franchise agreement. it gives the franchisee the right to use the brand, trademarks, and business model of the franchisor.
- Typically ranges from a few thousand to hundreds of thousands of dollars, depending on the franchise brand and industry.
ONGOING ROYALTIES
- The franchisee is typically required to pay an ongoing royalty fee to the franchisor. this is usually a percentage of gross sales, but it could also be a flat fee.
- Royalties can range between 4% to 12% of gross sales, depending on the franchise.
ADVERTISING FEES
- Franchisees contribute to the franchisor’s marketing and advertising fund, which is used for national or regional advertising campaigns.
- This fee can be a fixed amount or a percentage of gross sales (often around 1% to 4%).
- In some cases, franchisees must also spend a minimum amount on local advertising.
EQUIPMENT & SUPPLIES
- Franchisees often have to purchase specific equipment and supplies from approved vendors to maintain quality standards.
- These costs are often not included in the initial franchise fee and may be significant depending on the business model (e.g., kitchen equipment for a restaurant franchise).
REAL ESTATE & LEASE COSTS
franchisees may be responsible for finding, securing, and paying for the location where the
business will operate. this can include:
- Lease payments or property purchases.
- Renovation and construction costs to meet franchise standards (often called buildout costs).
- Maintenance and utilities.
TRAINING FEES
- The franchisor typically provides training for the franchisee and their staff. while some training programs are included in the initial franchise fee, there may be additional costs for ongoing training or supplementary programs.
- Travel and accommodation expenses for training sessions may also fall on the franchisee.
TECHNOLOGY FEES
- Many franchises require the franchisee to use the franchisor’s proprietary technology, such as point-of-sale (pos) systems, accounting software, or e-commerce platforms.
- Franchisees may be required to pay for the initial setup and monthly maintenance or subscription fees for these systems.
INSURANCE
- Franchisees must typically obtain specific types of insurance (e.g., liability, property, and business interruption insurance) to protect both the franchisee’s and franchisor’s interests.
- The costs of insurance premiums are usually the franchisee’s responsibility.
INVENTORY PURCHASES
- Franchisees need to purchase initial and ongoing inventory from the franchisor or its approved suppliers. the cost will depend on the size of the business and its operational needs.
- Some franchisors require a minimum level of inventory to be maintained at all times.
RENOVATION OR REFURBISHING COSTS
- Franchisees may be required to periodically renovate or update the premises to align with new branding guidelines or updated business models. these costs are typically borne by the franchisee.
- These updates could be mandated every few years during the life of the franchise agreement.
AUDIT AND INSPECTION COSTS
- The franchisor may conduct audits or inspections to ensure the franchisee is complying with brand standards. if issues are found, the franchisee may be responsible for the costs of addressing them or re-inspection fees.
LEGAL AND ACCOUNTING FEES
- The franchisee may incur legal and accounting fees for reviewing the franchise agreement,setting up the business structure, filing taxes, and maintaining financial records.
- In some cases, franchisors may require franchisees to submit financial records for audits,which may involve additional accounting fees.
RENEWAL FEES
- At the end of the franchise agreement term, the franchisee may have the option to renew.renewal fees are often required and can be a significant financial obligation, although usually less than the initial franchise fee.
EXIT COSTS
- If a franchisee wishes to sell or exit the franchise, there may be additional costs associated with transferring the franchise to a new owner or terminating the agreement early.
- Some franchisors charge a fee for early termination or a transfer fee for selling the franchise.
PENALTIES OR FINES
- Failure to comply with the franchisor’s guidelines (e.g., late payments, not maintaining standards) may result in financial penalties or fines as outlined in the agreement.
Join the King Chicken Loyalty Program and get rewarded for every purchase. Members receive exclusive offers, early access to new menu items.
Contact Information
© 2024 Copyright King Chicken.