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.
Close
How does a franchisor earn an income from its franchisees?
Usually, a franchisee will be required to pay an initial fee in full on entering into the franchise agreement. This is payable in respect of the initial range of services the franchisor provides to the franchisee, as well as a charge for the value of joining the franchise system.
In addition, the franchisee may be expected to pay for an initial package of equipment and other items required to set up the business. The franchisor may have bought the equipment from suppliers at a discount below the market price. Franchisors may charge a mark-up to cover the cost of putting the package together and make a contribution to its overheads.
In order to finance the continuing services and back-up provided to franchisees, the franchisor has to secure a regular flow of income. This is normally achieved by charging what are usually called management services fees or royalties on continuing fees.
Most franchisors charge a straight percentage fee based on the gross revenues of the franchisee.
If you have to buy all or some of your products from the franchisor, you need to enquire whether the franchisor will make a profit on this transaction. Occasionally, the franchise agreement will not provide for the payment of a separate management services fee or other continuing fee, as the mark-up on the sale of goods will instead be the source of profit for the franchisor.
The franchisor may decide that where it takes a lease of premises and sub-lets to its franchisees, that it charges a higher rent to the franchisee, thereby earning a profit rental for itself.
Some franchisors add on a fixed sum or certain percentage of the annual rent payable to cover their costs in administering the sub-leases.
Shelley Nadler is a legal director in Bird & Bird’s international franchising team and has many years’ experience of advising on all aspects of franchising.
You might also be interested in
![Author: Vincent Anthony Author: Vincent Anthony](/images/made/15a98ba108c60ca5852ed10cddec73bd16bc798c.jpg)
Answered by Vincent Anthony
Vincent Anthony writes: The property market has wide appeal because it is relevant to everyone: we all... read more
![Author: Louise Harris Author: Louise Harris](/images/made/81463d158e3d961e27c0ebcdf232b7072d2f3fdf.jpg)
Answered by Louise Harris
Louise Harris writes: Richness or wealth is relative. We always want more, I guess. So, what is... read more
![Author: Shelley Nadler Author: Shelley Nadler](/images/made/30ede99be89f361526162856856bd0d4018f3a4b.jpg)
Answered by Shelley Nadler
Shelley Nadler writes: A concern that businesses may have when deciding to franchise their business, is the... read more
![Author: Alan Wilkinson Author: Alan Wilkinson](/images/made/65741c6bb70d1e745499072da5482c43f7dea846.jpg)
Answered by Alan Wilkinson
Alan Wilkinson writes: There are two elements to consider here. First is the franchise fee itself, and... read more
Exciting Franchise Opportunities
![The Knot Churros logo](/images/made/images/uploads/companies/The_Knot_Churros_logo_75_75_s.jpg)
Start your own The Knot Churros franchise
Yes
Find Out More£600,000
![The Knot Churros logo](/images/made/images/uploads/companies/The_Knot_Churros_logo_75_75.jpg)
Request Free Information
Send a free enquiry to The Knot Churros for further information!
![Brokerplan Academy logo](/images/made/images/uploads/companies/Brokerplan_Academy_Logo_75_28_s.png)
Start your own Brokerplan Academy franchise
Yes
Find Out More80,000
![Brokerplan Academy logo](/images/made/images/uploads/companies/Brokerplan_Academy_Logo_75_28.png)
Request Free Information
Send a free enquiry to Brokerplan Academy for further information!
![Dyno-Rod Drains logo](/images/made/images/uploads/companies/DYNO-ROD_logo_75_75_s.jpg)
Start your own Dyno-Rod Drains franchise
Yes
Find Out MoreVariable
![Dyno-Rod Drains logo](/images/made/images/uploads/companies/DYNO-ROD_logo_75_75.jpg)
Request Free Information
Send a free enquiry to Dyno-Rod Drains for further information!
![Mobile App City logo](/images/made/images/uploads/companies/Mobile_App_City_logo_75_75_s.jpg)
Start your own Mobile App City franchise
Yes
Find Out More£100,000
![Mobile App City logo](/images/made/images/uploads/companies/Mobile_App_City_logo_75_75.jpg)
Request Free Information
Send a free enquiry to Mobile App City for further information!
![Cakes & Bakes logo](/images/made/images/uploads/companies/Cakes_and_Bakes_Logo_75_75_s.png)
Start your own Cakes & Bakes franchise
Yes
Find Out More£65,000
![Cakes & Bakes logo](/images/made/images/uploads/companies/Cakes_and_Bakes_Logo_75_75.png)
Request Free Information
Send a free enquiry to Cakes & Bakes for further information!
Companies to Consider
![Newsletter Signup](https://cdn.what-franchise.com/assets/images/misc/sidebar-newletter.jpg)
Get expert franchising news delivered straight to your inbox
Franchise news, advice and new opportunities delivered weekly.
Must Read Articles
-
Why business coaching is a springboard to franchising success
Added 2 days ago | 2 min read
-
How to run a successful dessert restaurant
Added 4 days ago | 2 min read
-
Extra Help targets further expansion
Added one week ago | 2 min read
Franchises by Minimum Investment
Find your next business opportunity
Search 100s of UK franchises and become your own boss today.
-
Under 10k
Starting a franchise doesn't have to be costly
Click here -
Under 20k
A mid-range investment for the more experienced
Click here -
Over 50k
If budget is not an issue, then don't miss these.
Click here -
Local Franchises
Find the perfect franchise in a location to suit you
Click here
What Franchise Newsletter
Keep up to date with all the industry news