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.
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
Will a franchisor ensure I operate my business within the required health and safety guidelines of the sector I operate in?
Answered by Shelley Nadler
Shelley Nadler writes: The franchisor should provide health and safety guidelines appropriate to the sector the franchise... read more
Answered by Louise Harris
Louise Harris writes: The initial investment in a franchise varies greatly across the industry, but it’s one... read more
Answered by John Pratt
John Pratt writes: As with all franchises, you have to ask yourself: Is this the sort of... read more
Answered by Alan Wilkinson
Alan Wilkinson writes: One of the attractions of franchising is the resilience it shows through hard times... read more
Exciting Franchise Opportunities
Companies to Consider
The Eaton Practice
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 2 years ago | 2 min read
Added 13 hours ago | 2 min read
Added 4 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