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Are a franchisor’s ongoing fees paid on a monthly basis?
Brian Duckett writes:
In the majority of cases yes they are and that’s what we’d normally recommend to our clients. Whatever those fees are for, be they management services fees, payments for goods supplied, rental payments on equipment, contribution to national marketing or even repayments on loans from the franchisor, ‘little and often’ is by far the best way to pay them. If the payment method is automatic, for example by standing order or direct debit, that’s even better.
There are many reasons for recommending that, the major one being the franchisor needs to protect its own cash flow in order to be able to continue to supply the services the franchisees receive.
A common theme within franchising is that franchisees eventually question the amount they are paying in ongoing fees. The more successful the franchisee, the more they pay. If that fee were to be due quarterly or annually, it would look like an awfully big cheque to sign and would likely raise even more questions.
Far better for the franchisee to get into the habit of paying smaller sums more regularly, a further benefit of which being that any problems highlighted by late payment can be recognised and dealt with sooner.
Brian Duckett is chairman of The Franchising Centre, part of the world’s largest network of specialist franchise consultants.
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