General questions about franchising
In this section, experts answer general questions most commonly asked which go beyond the specific subject areas listed above.
What type of fee is the franchisee required to pay?
The franchisee pays the franchisor three types of
• Entry fee . This grants the franchisee the right to join the network and includes the following:
- The right to use a known brand, granted by the franchisor to the franchisee.
- Training process and assistance from the franchisor to the franchisee prior to and during the opening of the outlet to the public.
- Partial indemnity paid to the franchisor for initial investments made in establishing the franchise.
- The entry fee may also depend on the potential of the exclusive territory to which the franchisee is given access.
• Royalties or operating fees. Sums paid by the franchisee to the franchisor periodically for ongoing assistance and support provided. Unlike the entry fee, these payments constitute the franchisor’s principle source of income.
• Advertising fee . The goal is to create a pool of funds for investment in advertising or marketing, which will benefit the network as a whole (brand profile and image, promotions, etc.). Advertising fees should not represent a source of income for the franchisor, who should simply act as administrator for income received. It is therefore recommended that franchisors use separate bank accounts for income and advertising fees. They should also provide details of sums received and the purpose of said sums.