Franchise Fees and Royalty Fees: What are They?

franchise fee

In addition to a franchise fee, it costs money to start a new business – even a well-established franchise.  That’s not a surprise to anyone considering going out on their own as a business owner.  There are the costs that come with an actual office: rent for office space, furniture, maybe utilities, even little things like pens and printer paper.  Additionally, there are the costs that come with personnel: you have to pay yourself and anyone else who works for you. Finally, there are costs that come with marketing: signs, flyers, billboards, and online advertising.  These are just a few of the expenses that come with opening any business.

If you choose to open a franchise, there will also be franchise fees and royalty fees. These fees can be quite costly. When it costs so much to start a business anyway, these additional franchise fees can feel burdensome.  However, instead of thinking of them as a burden, think of them as an investment. Franchise fees and franchise royalty fees are not cheap. But, as with anything else, you get what you pay for. As a franchise operator, you will receive a significant return on investment with franchise and royalty fees.

What Is A Franchise Fee?

A franchise fee is the amount of money it costs to purchase the rights to open a franchise.  It gives you the license to own and operate a business using the parent company’s trademark, service mark,  trade name, and advertising symbol. It is a one-time fee, meaning that you will not have to pay it again. Franchise fees are not cheap.  Depending on the type of franchise you purchase, fees can run from $20,000 to $40,000.  

What do you get with your franchise fee?  The main thing you get with your franchise fee is name brand recognition.  One of the biggest challenges in starting a new business is just that–it’s new.  No one has heard of it. As a business owner, you have to build a reputation and brand recognition.  That can take a lot of time and money. When you invest in a franchise, the brand has already been developed.  As soon as you hang your sign, people know what your business does, and what are its values and standards. That name brand recognition allows you to get your business running much more quickly.

What Is A Royalty Fee?  

A royalty fee is an ongoing fee that the franchisee pays to the parent company.   It is typically collected monthly. A franchise royalty fee is based on monthly revenue.  Depending on the nature of the business, a franchise royalty fee can run from 4% to 12% of the monthly revenue.

What do you get with your royalty fee?  For one thing, you get to operate under the umbrella of the parent company.  Royalty fees are just the cost of running a franchise. The parent company makes most of its money from royalties.  It uses that money for things like operating expenses, national marketing, training, and future developments. Royalty fees are an investment in the brand name that benefits all franchisees.  Any improvements in the brand name reflect well on local franchises.

If you are considering investing in a home healthcare franchise, consider partnering with A Better Solution in Home Care.  WIth your franchise fee, you will purchase the name brand recognition of a leading provider of home healthcare services.  Our team is ready to help you fulfill your dream of becoming an entrepreneur. Reach out to us today.