Understanding the Investment: Your Guide to the Royalties, Charges, and Fees Involved in Starting a Franchise
Opening your own accounting franchise with Supporting Strategies can be one of the smartest financial investments you ever make. As a franchisee, you can own your own business while taking advantage of the reputation, tools, knowledge, and resources of your franchisor. However, access to those benefits comes with a variety of costs you should understand before making the move to invest. These costs include royalties, initial fees, and many other items that may or may not be unique to specific franchises.
Initial Franchise Fee
Before you get a penny of income from your new franchise, you’ll have to put money up front to get your foot in the door. You can think of this payment as your initial membership charge, and this charge entitles you to things like training, equipment, and supplies, as well as:
- Area development fees
- Software licenses
- Deposit agreements
- Promotional materials
- Initial inventory
You can find out exactly what your initial fee includes by closely examining your written accounting franchise agreement. Most franchises cost anywhere from $10,000 to $200,000 upfront, but the costs can be much higher for larger, well-known companies that are known to pull in big profits.
Once your accounting franchise gets up and running and money starts flowing in, you’ll be expected to make ongoing payments to your franchisor. These payments, known as a royalties, vary from business to business. Think of these fees as a subscription charge for staying within the business. Royalties can cover the costs of ongoing materials, marketing campaigns, and administrative services, and they are part of your franchisor’s profits. The payment period for your royalties can be every month, every week, or any other period of time set out in your agreement.
In general, the more responsibilities your franchisor has for running of your business, the higher its ongoing fees are likely to be. Whether your fee is a percentage of your gross revenue or a flat rate can have a big impact on your profits. Royalties don’t always come in the form of direct monetary payments; they can be in the markup of products or services your franchisor delivers to you. The details should all be laid out in your written agreement. The more money you make, the more money your franchisor makes, so it’s in both of your interests to make your location as profitable as possible.
Some companies lump all the costs of franchising within the initial fee and royalties, while others list them out item by item. For example, the processing fees for credit card payments may be included in your regular payments or may vary according to the number of cards your branch processes. You may be expected to pay for advertising yourself, or your franchisor may handle a variety of local, regional, or national marketing campaigns. Special fees can also be assessed when the company launches new products and services or makes major changes to the way business is conducted.
The only way to completely understand the specific costs of your accounting franchise investment is to carefully look over all your contracts and agreements and fully read the FDD (Franchise Disclosure Document). If you have any questions about what is or isn’t included, you can always ask a franchise lawyer.
Interested in learning more? Then contact Supporting Strategies today!
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