An initial franchise fee is a fee that franchisors charge franchisees when purchasing a franchise. The initial franchise fee is intended to compensate franchisors for the license granted to franchisees (i.e. to operate a franchised location) and to reimburse the franchisor for the administrative tasks and training that will be involved in getting your new franchise up and running. Structuring the right franchise fee is critical. Some factors to consider include:
- Cost of providing a thorough initial training program
- Cost associated with your franchisee recruitment and selection process
- The scope of the protected territory‚ if any‚ that will be granted
- Costs associated with assisting franchisees with site selection
- The value and recognition of your existing trademarks and trade dress
There is no set formula for selecting the "right franchise fee" for your business‚ just factors that you must consider and evaluate. Selecting the right fee is more "art" than "science".
For more information on starting a franchise request a complimentary copy of "The Franchise Formula: A Guide to Franchising Your Business in the New Economy" by Charles N. Internicola franchise lawyer.