The franchise business will contact you by means of email and/ or telephone only to the email address and phone number you have provided.
By submitting the enquiry form you are consenting to send your personal information to the selected franchise business.
You also agree to receive further newsletter email marketing from What Franchise.
How does a franchisor determine the cost of a franchise?
There are a number of elements to the cost of a franchise. First there is the initial fee a franchisee pays, which will be for initial training, usually the provision of some stock and stationery, a marketing launch and so on. Then there will be continuing fees. Normally the management fee and the marketing fee are approximately 10 per cent of a franchisee’s turnover, although this percentage ought to be reduced if the franchisor obliges franchisees to purchase products or services from it or a nominated supplier and receives commissions, discounts or retains a mark-up.As to the initial fee, it is generally considered to be good practice for franchisors not to make a profit from it because otherwise there is a danger the franchisor’s business becomes focused on the sale of franchises. The other guiding principle is that the amount of the initial fee should bear some relationship to the likely profits a franchisee is going to obtain, so there isn’t much point in the franchisor charging an initial fee of £100,000 if franchisees will only make £10,000 a year from the operation of the franchise.What franchisors have to do is calculate all their costs, not only those relating to initial training, supply of stock and so on, but also the cost of recruitment. Recruiting franchisees and going through the process of ensuring they are the right people for a particular franchise is expensive. Many franchisors calculate this element to be over £5,000. The initial fee should reimburse the franchisor all these costs.
You might also be interested in
Answered by Alan Wilkinson
Alan Wilkinson writes: There are two elements to consider here. First is the franchise fee itself, and... read more
Answered by John Pratt
John Pratt writes: It is simply not possible to refer to taking a franchise as an “investment”,... read more
Answered by Louise Harris
Louise Harris writes: It’s quite a lot like choosing a life partner. You need to be interested... read more
Answered by Shelley Nadler
Shelley Nadler writes: Franchise law is a specialist area and it may not be something that your... read more
Exciting Franchise Opportunities
Companies to Consider
Stagecoach Performing Arts
No Letting Go
Chop & Wok
Profit between 27 to 33% of turnover
The Spitting Pig Co
40% net profit on a turnover of £110,000
Cash flow positive from month 4
Potential ROI within 12 months, with average profits of 34% in the first year
Laser Clinics United Kingdom
Get expert franchising news delivered straight to your inbox
Franchise news, advice and new opportunities delivered weekly.
Must Read Articles
Added 3 years ago | 2 min read
Added about 19 hours ago | 2 min read
Added about 3 days ago | 2 min read
Find your next business opportunity
Search 100s of UK franchises and become your own boss today.
What Franchise Newsletter
Keep up to date with all the industry news