Franchise Management Fees Posted by Binnie

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Franchise Management Fees

Posted by Binnie in Ask The Experts on 24.02.2009 7:26:19 pm | 2084 views

I have just started a new franchise and the monthly franchise management fee is something I had not taken into account and wasnt explained to me on my initial meeting.   Could someone tell me what a reasonable amount should be, whether it is usual for this to be paid within the first month of trading and what one should expect to get in return.  Also, I am required to acquire stock from the franchisor which I also have to pay for.  As I am new to this,  your help and advice would be appreciated.

Comments

JT on 25.02.2009 10:28:56 am | Reply

Binnie

It would appear, from your questions, that there were a couple of questions that perhaps should have been raised at the interview. However, if you didn't bring up the subject of on-going monthly fees, the franchisor certainly should have. It may be worthwhile re-reading your franchise agreement to check that this fee is mentioned clearly. In terms of what is a reasonable amount, franchisors will make it clear to you the level of on-going support you can reasonably expect in terms of administration, know-how, marketing support, insurances, web page features etc. This, when combined, will usually involve some level of fee, although this is not always the case - some franchisors will include this back-up without charge for a period of time after start-up. If the fee is on an escalating scale based on turnover, check that increased turnover necessitates increased activity on behalf of your franchisor - if not, ask them to justify the increasing fee? Did the franchisor also make it clear that you must buy stock from them? If so, is their price for supply competitive with other sources? Do you have to buy increasing or minimum amounts periodically? I don't like to say this but I fear you haven't completed your research about this franchise before commiting to it - read your agreement again a few times and check that "it does what it says on the tin".

JT

 
Andy Cheetham on 11.04.2009 5:53:20 pm | Reply

Hi Binnie

There's no quick answer for you other than the obvious point that you have been very naive by not reading the franchise agreement. There is however hope fro you if the fees you mention are not detailed in the agreement so my advice would be to read that page by page and double check what you have signed up to. If the fees are in the agreement then you are liable for them, if they're not then dont pay them :-) To everyone else reading this - check the detail before you sign on the dotted line!

 

 

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