How Royalties and Franchise Fees Actually Benefit Franchisees

by Susan Scotts

Do you think it’s easy to build a successful business from scratch? Sure it is! All you have to do is come up with the idea for a product/service. Then you have to have enough time and money to market, operate and manage the business, create and execute an operating plan, have access to capital and expertise, go it alone and economically and emotionally withstand the time to build the business. This can take years of trial and error -- not to mention money! Good luck! Then, once your business is up and running, who are you going to call when you don’t know what to do or need advice from someone working in or on the same exact business?

Or you could go the franchising route. Franchising is a proven business model with a strategy to expand business and with a proven, replicable system of doing business. The idea, tools, technology, training and ongoing support are built in. Even better, the system and all the tools are constantly updated for you. People are, however, often reluctant to invest in a franchise thinking investment is too much or the royalties and fees are too high. Seeing it in a different way may help you understand the advantages of this investment. The franchise fee is the investment that puts a franchisee into business -- not as a partner -- but as a participant. Think of it as an entry fee for the replicable system that is built, proven and constantly updated.

The benefits of an established system can include (but not always):

• Development of systems and brands • Successful operating systems and business software • Initial and ongoing training and coaching support • A well-developed marketing and advertising plan • Costs of qualifying candidates, administration and legal expenses • Assistance with selecting and building a successful site location and help with buildout, if needed • Discounts on purchasing initial and on-going supplies and equipment • On-going trend research and additional revenue streams • New vendors and digital platform

By leveraging the strength of the group, these fees reflect the value of becoming a part of a well-developed, comprehensive system behind the brand. Additionally, many franchises have ongoing royalties. A great percentage of royalties (which can range from 6 percent to 25percent) are actually reinvested into the system to continually refine and update every part of the business and can include updating training, operating systems, support systems, market analysis to stay on the cutting edge, new technology, advertising methods and additional training. These investments all that ultimately benefit YOU as a franchisee and cost money to provide. The royalties are reinvested into the system to benefit YOU.

So now I ask you, How much time and money would you have to invest to create and keep current, all these systems and benefits to have a successful business of your own? Maybe it is time to give franchising a try.

Susan Scotts is a multiple award winning career transition coach with The Entrepreneur’s Source® and possesses three decades of experience in helping em- power individuals to become entrepreneurs through franchise business ownership. For a complimentary consultation, she can be reached at 561-859-9110 or SScotts@EsourceCoach.com.