Initial Franchise Fees
A one-time fee is paid by the franchisee to the franchisor to buy into the franchise system.
Royalty Fees
A continuing fee is paid by the franchisee to the franchisor as a cost of doing business with the franchisor organization. Royalty fees are usually a percentage of the franchisee’s gross sales.
Advertising Fee
A fee is paid by the franchisee for corporate advertising expenditures.
Sale of Products to Franchisees
A franchisee may be required to purchase specific products and supplies from the franchisor.
Sale of Additional Services
A franchisor may offer other resources to the franchise network such as accounting, bookkeeping, insurance, training, and/or consulting in return for additional fees.
Rental or Sale of Real Estate
The franchisor may own the real estate and lease or sell the property to the franchisee.
Financing Franchisees
A franchisor can set up the financing for franchisees to purchase a franchise through third-party outside lenders. The franchisor can receive compensation from some of these third-party lenders. This compensation is the difference between the “interest buy rate” (the actual cost of the third party money) and the actual interest loan rate (the interest due and payable by the borrower franchisee).