Questions about franchising and the law

In this section, experts answer the questions most commonly asked about the legal requirements and stumbling blocks for franchisors and franchisees.

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Why do franchisees have to pay ongoing franchise fees?

Typically the regular fees cover the services rendered by the central system to the franchisee after he/she has commenced business, notably in this context assistance with financing, management assistance and training facilities by the central system. Most franchisors prefer payments dependent on turnover to a fixed royalty, in order to underline the extent to which their own returns are dependent on the earnings of the franchise. The rates, which vary widely, are mostly based on turnover as exactly defined by contract.

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