A franchise allows you, the investor or the “franchisee,” to do business. By paying a deductible fee that can cost several thousand dollars, you get a format or system developed by the company (franchisor), the right to use the name of the franchisors for a limited time, and the support. For example, the franchisor can help you find a location for your point of sale; Initial training and operating manual and advise you in the areas of management, marketing and personnel. Some franchisors offer ongoing assistance, for example. B monthly newsletter, a free phone number of 800 for technical assistance as well as regular workshops or seminars. While buying a franchise can reduce your investment risk by allowing you to connect to a well-established business, it can be expensive. You may also need to cede essential control of your business while agreeing to contractual commitments with the franchisor. Below is an overview of several components of a typical franchise system. Look at everyone carefully. 1. THE COST In exchange for using the franchisor`s name and support, you can pay some or all of the following fees.
Initial deductible and other expenses Your upfront deductible, which cannot be refundable, can cost several thousand to hundreds of thousands of dollars. There can also be considerable costs to rent, build and equip an outlet and purchase a first inventory. Other costs are operating licenses and insurance. You can also pay a “Grand Opening” fee to the franchisor to promote your new outlet. Continuous fees You may have to pay licensed royalties based on the percentage of your gross monthly or weekly income. You often have to pay royalties, even if your outlet did not receive any significant income during this period. In addition, royalties are generally paid for the right to use the franchisor`s name. Even if the franchisor does not provide the promised support services, you may have to pay royalties for the duration of your franchise agreement.