| At first glance, it would seem ideal if a franchise does | | | | More important than brand, however, a franchise gives |
| not require a royalty fee. And in fact, there are various | | | | a Franchisee access to the operating system of the |
| franchise opportunities being offered today that do not | | | | company. This operating system is composed of all |
| have royalty fees attached. These opportunities would | | | | aspects of business operations that have been tried |
| boast that all you'll need to pay for is a lump sum that | | | | and proven to be effective by the Franchisor. When |
| pays for your franchise, the start-up inventory and the | | | | you take up a franchise, you automatically gain |
| start-up training. After that, all revenues would be | | | | experience that is very relevant to your own business |
| yours. They would say that this is as it should be, and | | | | operations through proper and continuous training. |
| you are most likely to agree. | | | | The franchise royalty fee also covers the support that |
| But should it really be so? A franchise royalty fee is | | | | the Franchisor continually gives to the Franchisee. |
| actually the Franchisor's (the owner of the whole | | | | Support refers to immediate and constant access to |
| franchise) share of your revenues. It is usually around | | | | consultants who can help troubleshoot problems for |
| 2% to 10% of your profits. And it is usually part of a | | | | the Franchisee. This also refers to the advertising and |
| franchise package that offers full-time and continual | | | | marketing that the Franchisor does for the whole chain. |
| support to the Franchisee. | | | | The support system that your royalty pays for makes |
| In a nutshell, the royalty fee pays for the value that a | | | | sure that you're not left floundering. |
| Franchisor gives the Franchisee when a franchise | | | | In a franchise opportunity that has no royalty fee, you |
| contract is engaged in by both parties. First of all, when | | | | cannot expect to get all these benefits even if they |
| a Franchisee buys a right to a franchise, he is buying a | | | | were promised. The brand is the least that you could |
| right to operate using a previously established, and thus | | | | expect. But without the operating system and the |
| known, business. The Franchisee no longer has to start | | | | support system that the royalty fee ensures you have, |
| from an unknown entity and build a brand. The brand is | | | | this wouldn't count for much in the long run. |
| all a part of the whole package. | | | | |