Fee and royalty
Date : March 6, 2024
FRANCHISING FEE AND ROYALTY FRANCHISING
The differenze tra franchising fee e royalty franchising
Many entrepreneurs, even those with clear ideas about their franchisors, confuse two crucial terms to understand the dynamics of a franchise: fee and royalty.
The fee (also called entry fee) is the economic consideration that the affiliate pays a one-time fee to access the franchisor’s network and use a package of services useful to start the business, such as training, know-how, technical assistance, etc.
The royalties instead represent the expense that the affiliate periodically supports in order to use the brand of the franchisor in a determined territory and in order to enjoy some services, like the continuous formation, some services of specific marketing, assistance from remote, control services, etc. Royalties can be fixed or variable and are generally calculated as a percentage of turnover.
How do I calculate fees and royalties?
There are principles to follow to do this. One of them is feasibility. The franchisor calculates the costs taking into account the expenses for the formation, the layout design, possible commercial intermediations to pay, the cost of the analyses, like that of geomarketing and similar etc.
How can competitive fees and royalties be established on the market?
There are generally two paths a franchisor can take. The first is to provide lower fees than competitors, or, for the same fees and royalties, offer more substantial and profitable service packages.
Feasibility, competitiveness and proportionality, are the principles to follow in order to establish fair and market-appropriate royalties and fees. Find out more by turning to our professionals.
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