Franchise News
What is a Franchise Fee?
A franchise fee is a one-time payment that a franchisor collects from a franchisee for the right to use the company's brand, products and intellectual property.
A franchise fee is a certain amount of money that is paid to a franchisor by an incoming franchisee in exchange for the right to replicate the business model and concept. Under the Federal Trade Commission, which defines franchising throughout the United States, a business can only be considered a franchise if the franchisee makes a payment to the franchisor of at least $500 (annually adjusted) either before or within six months of opening the business.
As opposed to ongoing royalty fees or overhead costs, the franchise fee is, usually, a one-time payment, but can also be paid incrementally depending on the terms of the franchise agreement.
The cost of a concept’s franchise fee will be disclosed in the brand’s Franchise Disclosure Document, and is often included as a supplemental fee in addition to the outlined startup costs. Franchise fees are generally in the range $20,000 to $50,000 depending on the brand.
Related stories:
Don’t Miss the Next Big Franchise Story
Sign up for the 1851 Franchise newsletter to get our biggest stories before everyone else
By signing up, you agree to our user agreement (including class action waiver and arbitration provisions), and acknowledge our privacy policy.
