1851

<a href="https://1851franchise.com/franx-yo-broker-sell-my-franchise-2714728">Selling franchises</a> can build a brand up to global dominance, validate a business concept and set up recurring royalty payments for life, but how does an entrepreneur know how to price their business?Any entrepreneur selling franchises should consult a franchise attorney to help craft a Franchise Disclosure Document and make sure that any agreements the franchisor enter into are legally binding and above-board. But according to <a href="https://www.ifranchisegroup.com/our-consultants/mark-siebert/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-price-a-franchise-including-franchise-fees-2715549" target="_blank" rel="nofollow">Mark Siebert</a>, founder of the <a href="https://www.ifranchisegroup.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-price-a-franchise-including-franchise-fees-2715549" target="_blank" rel="nofollow">iFranchiseGroup</a> and an <a href="https://www.amazon.com/Franchisee-Handbook-Everything-Buying-Franchise/dp/159918639X?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-price-a-franchise-including-franchise-fees-2715549" target="_blank" rel="nofollow">accomplished author on franchising</a>, attorneys can only give you part of the picture.&nbsp;According to Siebert, pricing a franchise and its fees represents a major stumbling block for budding entrepreneurs. Here’s how to nail the pricing of your franchise.<h4>How To Think About Royalty Payments</h4>“The attorney’s role is to document a franchise program,” said Siebert. “The attorney’s role is not to say, ‘Your franchise should be at a five or six percent royalty payment. They can only tell you what they’ve seen other franchises do. They’re not crunching the numbers.”To get the <a href="https://1851franchise.com/nick-powills-royalties-are-greater-than-fees-2709235">right royalty payment</a>, an entrepreneur needs to take a long view of the situation. Unfortunately, according to Siebert, many franchisors simply try to match or undercut their competition without considering what royalty fee makes sense for their system.&nbsp;“If you’re off by one percent on your royalty, it could easily become a $10 million mistake,” said Siebert. “In franchising, if you’re off by one percent on $500,000 in sales, that’s a $5,000 mistake. If you sell 100 franchise units, that’s a half-a-million-dollar mistake. Over 100 franchises with a 10-year contract term, that’s a $10 million dollar mistake.”The goal of any franchise system is for the franchisor to become “royalty self-sufficient,” meaning royalties pay for the entire operation of the franchisor.Instead of pricing a royalty to beat competitors, think instead of how many franchise sales are needed to become royalty self-sufficient and when you could achieve that level.&nbsp;<h4>Learn the Industry Norms</h4>Each industry has different norms for pricing. A fast-food restaurant sells many units, so royalties in that industry tend to be smaller, more frequent payments. A contracting business that takes on large jobs tends to have a higher royalty percentage on fewer transactions.&nbsp;Additionally, consider your target markets. <a href="https://frannet.com/franchise-consultant/jack-armstrong/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-price-a-franchise-including-franchise-fees-2715549" target="_blank" rel="nofollow">Jack Armstrong</a>, the New Jersey president of <a href="https://frannet.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-to-price-a-franchise-including-franchise-fees-2715549" target="_blank" rel="nofollow">FranNet</a>, a franchise consulting firm, said that real estate considerations weigh heavily on cost structures in franchise deals.&nbsp;“If you’re looking at food, retail or automotive, it all depends on real estate,” said Armstrong. “It depends on where you look in the country. In New Jersey, real estate is expensive, so we see more service-based industries with a small real estate footprint. With retail space-heavy brands, the outside costs like real estate outweigh the franchise fees.”<h4>Franchise Fees Raise The Bar</h4>According to Armstrong, <a href="https://1851franchise.com/marketing-your-franchise-fee--2414">franchise fees</a> usually fit within the $20,000–$50,000 range. This one-time fee represents the cost of admission for franchisees, and it’s intentionally kept high. Franchisors hope to attract franchisees who are good with money, have liquid assets and know how to invest. Without a high franchise fee, any unserious entrepreneur could waste a brand’s time and tarnish its reputation.&nbsp;“Franchise fees are generally $20,000–$50,000. There’s not a lot of swing there,” said Armstrong. “If you’re spending $100,000 on leases and another $100,000 on equipment, franchise fees become a small part of the equation. The big question that remains is the royalty and what are you getting for it.”<h4>Name Your Price, But Back It Up</h4>Ultimately, franchisors set their franchise fees and royalties at levels they think their target buyers can afford with financing. Franchisors that provide better brand recognition, support and service will charge more than franchisors that have minimal presence.&nbsp;Unlike franchise fees, royalty fees are ongoing. Franchisors often also charge marketing fees based on a location’s revenue. In all cases, Armstrong and Siebert were unanimous: Franchisees want to see a detailed breakdown of where their money goes.For any fee, give franchisees a detailed breakdown of where that money is being allocated. If a franchisee has to pay $1,500 a month in marketing fees, give them an itemized list of marketing expenses and a breakdown of how they grew the business.By being detailed and thorough, a franchisor can think less about trying to undercut competition’s prices and shift the conversation more towards what their corporate office will do for franchisees.&nbsp;

How To Price a Franchise, Including Franchise Fees

1851 Franchise

Pricing your royalties a few decimal points off can cost you millions in the long run.

how-to-price-a-franchise-including-franchise-fees

Caring Transitions

How Caring Transitions Supports Adult Children in Managing Their Parents’ Moves

how-caring-transitions-supports-adult-children-in-managing-their-parents-moves

Senior Care Authority

Senior Care Authority Is a Great Fit for Multi-Generational Business Ownership

senior-care-authority-is-a-great-fit-for-multi-generational-business-ownership

The Growing Need for Senior Downsizing: How Caring Transitions Is Leading the Way

the-growing-need-for-senior-downsizing-how-caring-transitions-is-leading-the-way

Sola Salons

How Myrle and Julie McNeal Built a Thriving Sola Salons Franchise Empire with 17 Units

how-myrle-and-julie-mcneal-built-a-thriving-sola-salons-franchise-empire-with-17-units

Pet Wants

Why Fresh, Healthy Food Matters for Your Pet's Long-Term Health

fresh-pet-food-unleashing-the-power-of-healthy-nutrition-for-your-furry-family

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

Roof Scientist Launches Franchise Opportunity, Revolutionizing Roof Preservation with Innovative Technology

roof-scientist-launches-franchise-opportunity-revolutionizing-roof-preservation-with-innovative-technology

Restaurant Business: How McDonald's Is Restructuring To Compete With Specialized Chains

restaurant-business-how-mcdonalds-is-restructuring-to-compete-with-specialized-chains

Design with hundred dollar bill and orange "recession" banner across the middle

ABC News: Recession Risks Are Rising, Economists Say. Here’s What to Know.

recession-risks-impact-economy-franchise-world

NRA: Restaurants Focus On Enhancing In-Store Experiences To Attract Diners in 2025

nra-restaurants-focus-on-enhancing-in-store-experiences-to-attract-diners-in-2025

The Joint Chiropractic - Dr. Anthony Tran - IFA Franchisee of the Year - 1851 Franchise

The Joint Chiropractic’s Dr. Anthony Tran Named Franchisee of the Year by the IFA

joint-chiropractic-dr-anthony-tran-ifa

How Car Sales Taught Buddy's Home Furnishings’ Mitchell Lee the Secrets of Franchise Development

how-car-sales-taught-buddys-home-furnishings-mitchell-lee-the-secrets-of-franchise-development

Franchise Deep Dive: Studio Pilates Franchise Costs, Fees, Profit and Data

franchise-deep-dive-studio-pilates-franchise-costs-fees-profit-and-data

Onigilly: The Low-Cost, Scalable Fast-Casual Concept Bringing Authentic Japanese Onigiri to the U.S.

onigilly-the-low-cost-scalable-fast-casual-concept-bringing-authentic-japanese-onigiri-to-the-us

onigilly-japanese-kitchen-food-overhead-shot

How Onigilly Is Bringing Healthy and Convenient Everyday Japanese Meals to the U.S.

how-onigilly-is-bringing-healthy-and-convenient-everyday-japanese-meals-to-the-us

Florida Franchisee Reflects on Success and Growth with Sylvan Learning

florida-franchisee-reflects-on-success-and-growth-with-sylvan-learning

Paris Baguette Ranks Among Top Franchises on Entrepreneur’s Franchise 500® for 2025 - 1851 Franchise

Paris Baguette Ranks Among Top Franchises on Entrepreneur’s Franchise 500® for 2025

paris-baguette-ranks-among-top-franchises-on-entrepreneurs-franchise-500-for-2025

Domonique Downing - Big Frog Franchise - Fayetteville, GA - 1851 Franchise

Coca-Cola Scientist Finds Path to Autonomy with Big Frog Franchise in Fayetteville, Georgia

big-frog-franchise-fayetteville-georgia

Top 25 Emerging Restaurant Franchises - 1851 Franchise

Top 25 Emerging Restaurant Concepts to Consider in 2025

top-emerging-restaurant-concepts-to-consider

Franchisee spotlight image with Randy and Sandy Craft, Children's Lighthouse logo on blue background

The Crafts’ Successful Journey from New Parents to Children’s Lighthouse Franchisees

the-crafts-successful-journey-from-new-parents-to-childrens-lighthouse-franchisees

The Top Quick Service Restaurant Franchises for 2025

the-top-quick-service-restaurant-franchises

How To Price a Franchise, Including Franchise Fees

MORE STORIES LIKE THIS