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
Is a royalty fee that’s charged as a percentage of turnover better than a fixed fee?
Louise Harris writes:
The use of fixed fee versus percentage of turnover royalties (or management service fees) is slightly controversial in franchising, but there are arguments for both.
A franchisor will primarily make their money from the royalties a franchisee pays.
Paying a fixed fee gives a known payment amount each month, irrespective of the amount of business a franchisee has. In some cases, this acts as a motivator for a franchisee, knowing that over a certain income each month 100 per cent of the income stays in the business. Since the franchisor will receive the same amount of money each month, the question is what motivation does the franchisor have to innovate and help the franchisee drive more business? And this is a question to ask before buying a franchise.
Working on a percentage means the franchisor also has ‘skin in the game’. There is motivation for a franchisor to innovate ways to drive business for the franchisee and increase local revenue, as they in turn earn more.
It does mean that sometimes paying the franchisor at the end of the month can feel tough, as it’s easy to forget they’ve helped you get to that level in the first place.
A cap or percentage fee reduction on achieving targets may be pertinent when a franchisee reaches higher income levels
Louise Harris is an experienced franchisor, having built and sold an award winning franchise. She’s currently franchise operations manager at Mathnasium UK.
You might also be interested in

Answered by Vincent Anthony
Vincent Anthony writes: The property market has wide appeal because it is relevant to everyone: we all... read more

Answered by Louise Harris
Louise Harris writes: Richness or wealth is relative. We always want more, I guess. So, what is... read more

Answered by Shelley Nadler
Shelley Nadler writes: A concern that businesses may have when deciding to franchise their business, is the... read more

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

Start your own Explorer Travel together with Hays Travel franchise
Yes
Find Out More£35,000

Request Free Information
Send a free enquiry to Explorer Travel together with Hays Travel for further information!
_75_75_s.jpg)
Start your own Walfinch franchise
Yes
Find Out More£410,000
_75_75.jpg)
Request Free Information
Send a free enquiry to Walfinch for further information!
_(1)_75_75_s.png)
Start your own Hitsona franchise
Yes
Find Out More£210,000
_(1)_75_75.png)
Request Free Information
Send a free enquiry to Hitsona for further information!
Start your own Hybrid Fitness franchise
Yes
Find Out MoreN/A
Request Free Information
Send a free enquiry to Hybrid Fitness for further information!

Start your own Stickbug franchise
Yes
Find Out MoreN/A
We're sorry, this franchise is no longer seeking applicants.
Click here to find other Food & Beverage franchisesCompanies to Consider

Get expert franchising news delivered straight to your inbox
Franchise news, advice and new opportunities delivered weekly.
Must Read Articles
-
Brexit property investment myths BUSTED!
Added 4 years ago | 2 min read
-
Five reasons why robust training is critical for franchise brands
Added 3 months ago | 2 min read
-
How prospects can get the most out of a franchise show
Added 3 months 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