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What ongoing costs am I liable for as a franchisee?
As a franchisee you will be liable for a number of costs detailed in the franchise agreement and/or operations manual. The first cost you may incur is a one-off initial fee. Whether you have to pay this will depend on the nature of the franchise you are taking and your franchisor. In respect of ongoing fees there is likely to be: >> A monthly royalty fee that will typically be expressed as a percentage of the franchise business’ gross sales. >> A monthly marketing/advertising fee that is often charged by the franchisor, which again is typically expressed as a percentage of gross sales. Other less obvious ongoing costs include: >> Purchase of equipment or vehicles. >> Additional training. >> Rental of premises. >> Staff. >> Insurance premiums. >> Stationery. >> Finance costs if you, the franchisee, have taken out a loan to pay the initial fee or purchase or lease equipment/vehicles. While the above gives a general overview of costs, it may it also be prudent for a potential franchisee to ask existing franchisees to confirm any other costs that they incur on an ongoing basis as they will have first-hand experience.
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