TYPICAL FRANCHISE FEES
Typical Franchise Fees are:
The Initial Franchise Fee
The initial franchise fee is a one off payment made by the franchisee when they sign the franchise agreement. It is part of the buying price of the franchise, and therefore has a relationship to the value received by the franchisee. It covers:
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costs incurred in recruiting and training a new franchisee. |
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costs incurred in establishing the new franchisee's business. |
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a contribution to the development costs of the franchise operating system. |
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a net return to the franchisor for the right to use the system. |
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a contribution to the cost of protecting the inteelectual property belonging to the franchise system. |
Royalty Fee
The royalty fee covers the ongoing costs associated with supporting the franchise network and provides a profit for the franchisor.
It can be based on:
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a percentage of turnover, or |
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a flat fee, or |
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be tiered, that is reducing or increasing at certain turnover levels. |
Marketing/ Advertising Contribution Fee
There is normally a marketing fee payable, either as a flat fee or as a percentage of turnover. This is usually for marketing strategies , advertising etc.
Fees for Additional Training / Services
e.g. accounting services, technical services
Licence Fees
e.g. software
Product/ Equipment Supplied by Franchisor
May be supplied at cost or at a margin earned by the franchisor
Rent
Where the property is owned by the franchisor.
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