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The entry fee in franchising

The way you calculate it can vary according to the networks and is not strict, some franchises don’t ask for it, however we cannot call them free…

The entry fee is an initial lump payment that should more or less represent the money spent by the franchisor to welcome his new partner, with or without a benefit for the franchisor, with or without damping of the expenses and of the previous years to create and improve the concept. Hard to figure it also represents the right to use a brand, to benefit from its notoriety. Some brands indeed allow having customers the first opening day what is a real asset. This appreciation is hard to define that is the reason why the entry fee estimation is sometimes arbitrary.

The entry fee can include some services and some supplies like the training, the software or specific programs, the sales materials, advertising on the sales point, etc. It is important that these elements are well detailed.

The franchisee must well know what he pays. It is recommended not to accept to pay a global pack without transparency in order to be able to compare with other franchises. If you address to a new franchisor which brand is little known, you can negotiate the entry fee arguing that you are sharing the risk.

Depending on the networks and the sectors, the entry fee can vary from 3000 to 30 000, or even more. A franchisor that asks nothing is not necessarily cheaper, check that he is willing to get his expenses back before committing. In general, when he is doing without this money, he counts on getting his money back on other points. 

Dominique Deslandes
www.ac-franchise.com

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