Investment and Ongoing Fees
In addition to the franchise fee and royalties, some franchises will require that you provide ongoing payments such as management service fees. Such costs will be contingent upon the needs of the franchisor.
“These are all the fees paid by the franchisee to the franchisor (or its subsidiaries, suppliers, partners etc.) for the duration of the franchise agreement, where they are usually set out,” says Matteo Frigeri, Business Director with Seeds Consulting.
“They can be expressed as a % of the turnover of the franchisee's business or as a weekly or monthly fixed amount. Typically management service, advertising, training and software maintenance fees are ongoing fees. Entry and renewal fees are one-off payments. Where ongoing fees are absent, they are often replaced by mark-ups or rebates on products or services supplied to franchisees.”
Common ongoing fees include, but are not limited to:
- Technology fees
- Royalty payments
- Advertising/marketing costs
While fees that are not so regular but may appear from time to time include, but are not limited to:
- Ongoing training
- Renewal fees
- Transaction fees
Some franchises may require other fees specific to its industry, then of course there are sometimes day-to-day running costs such as employee wages or electricity bills.
The following are some examples of typical franchise fees taken from franchises listed on our site, explaining what you will receive in exchange for your initial investment:
Oven Rescue, as its name suggests, is a franchise specialising in oven cleaning. Its franchise fee is a fixed £9,500 for which the franchisee receives full training, uniform, equipment and regalia for their vehicle – with the franchisee supplying their own vehicle. The franchise currently has a deal in place through a third party (NatWest) to help franchisees pay their franchise fee. Payment is typically via a lump sum, although the franchisor refuses to rule out the possibility of coming to an arrangement of regular instalments if this better suits the needs of the franchisee.
The Original Poster Company (OPC) specialises in the distribution of greeting cards and is the world’s leading franchise operating within this space. OPC only have resale franchises so each one is a different price – a comprehensive list of resale opportunities can be viewed here.
All OPC franchise businesses are valued according to their proven historical profitability. The purchase price is based on three elements:
- A single initial franchise fee to OPC of £3,000 plus VAT
- A goodwill payment calculated as a % of the gross profit
- The transfer of stock and equipment at cost price
OPC do not offer financial support to pay the franchise package but they do have relationships with banks that can lend to franchise buyers depending on their personal financial status. It cannot be paid in instalments. There are no ongoing charges.
etyres is an online tyre retailer and distributor with a franchise fee of £34,000. In exchange, the franchisee receives their franchising licence, training, computer, equipment, corporate dress and initial van stock. Assistance with fee payment is available through all major banks with whom the franchisor has excellent relations. At present, the franchise fee can only be paid in instalments. The franchisee must also pay management service fees when required.
Equivalenza is an Iberian perfume and fragrance retailer seeking to expand into the UK. Its franchise fee of £14,625 covers the cost of furniture, design of the premises and an initial stock of perfumes and fragrances. Financial assistance is available through a third party. Franchisees do not have to pay ongoing fees, as the agreement stipuates that they gain exclusive rights to sell Equivalenza products.