As an expansion strategy for your business, you might consider master franchising. This is an arrangement in which you grant a franchisee the right to collect some portion of the up-front franchise fee and ongoing royalties in return for recruiting, training and supporting the franchisees. This can lead to rapid growth acceleration for your franchise. The downside is that you give up the right to determine who gets a new franchise - typically the profitable ones who follow the system rules - in a master franchise system this is not the case. New franchises go to those recruited by the master franchisor.
Pricing
"As a franchisor, you need to consider two basic components to pricing your franchise: the up-front franchise fee and the ongoing royalty rate." - Shane
Franchise Fee
The franchise fee is a one-time payment made by the franchisee to the franchisor when the franchise agreement is executed. The idea of this fee is to compensate the franchisor for the cost of getting the business started. It includes the value of goodwill, franchisee's territory, the cost of identifying and training franchisees, location assistance and the costs of signage and other initial equipment costs.
According to a survey of franchisors made by the IFA, the average initial franchise fee is approximately $32,000.
Average Franchise Fees in Selected Industries
Industry Average Franchise Fees Lodging $ 35,200 Restaurants $ 31,900 Printing and copying $ 27,900 Security and safety systems $ 27,100 Hair care $ 25,200 Employment and personnel services $ 22,700 Auto repair $ 22,600 Business services $ 22,194 Fast food $ 20,800 Laundry and dry cleaning $ 19,000 Real estate $ 14,700 Travel agencies $ 14,000
Royalty Rate
"The second major component of the price of a franchise system is the ongoing royalty paid to franchisors by franchisees. As a franchisor, the royalty is your major source of compensation, often accounting for more than 90 percent of the money that you receive from your franchisees over the live of your franchise agreement. In addition to providing you with your profit, the royalty gives you the incentive to support the franchise system over time. Royalties will be used to support your efforts to build the system, to pay for ongoing training, to help existing franchisees work out the kinks in their operations, to develop the brand name, to develop new products and services, and to monitor your franchisees." - Shane
Posts
No comments:
Post a Comment