What should I Charge for my Franchise Fee?

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If you are new to franchising your business, the idea of someone paying you a fee for your experience may seem awkward. So many great entrepreneurs are not accustomed to bragging about themselves and once they’ve franchised their business they are now faced with presenting a sizable price tag for what they know.

First, when you franchise your business, you should get something through your head immediately; what you know and your expertise in running and operating your business is worth a great deal of money. Some loud-mouthed boastful consultants sell half of what you have to offer for a whole lot more than a franchise fee.

You should feel very confident that if you’ve operated your business long enough to nail down your system that this alone can justify a franchise fee. You are a coach, a mentor, a financial advisor, a marketing expert, a staffing guru, and everything else about your business model is wrapped into one finely-tuned business consulting machine.

Once you have that part of the equation settled, you should also quantify the value of all the other things you will be providing a franchisee such as opening support, a brand, site selection, franchise funding help, hiring support, and a whole lot of other elements loaded with value. Now we’re getting serious about value, let’s next look at the hard costs to implement a new franchise location.

When you franchise your business you will offer a new franchise a specific list of resources. This will most often be the following;

Training held at your location (franchisee covers costs of travel)

Training held at franchisees location (franchisor covers travel)

Staffing support (we want to be careful with joint employer liability, but should help them build their team)

Marketing support, this might be running their grand opening, or could be spending dollars to help them market their new location opening.

Vendor introductions and negotiated purchase arrangements.

Technology implementation

On-site support during the first 3-6 months of business

So we need to not only make sure that we are charging enough for the value we are offering but also to cover the costs of opening the franchise unit.

Next, I would recommend looking over your competition. Who will your franchise be compared to when you franchise your business?  How do you stack up and compare to others in your market segment?  Make sure that you are taking other franchise brands into account so you don’t go to market out of whack when compared to other systems.

For more information on how to franchise your business, contact us.


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