It is common sense that we need to pay franchise fees when we decide to carry on business.
In general, there are mainly two kinds of fees that franchisees shall pay to franchisors. The most well-known one is franchise fee, while there is also a less well known but important one.
That is for franchise royalty fee. Here you may get confused about these two phrases. Let us explain it to you with some tips below.
The franchise fee is a kind of an initial fee we shall pay when we enter business for the first time. To make it simple, it will be charged at the time when we first become a franchisee.
Mostly, its amount depends on the system you are in. As an exchange,
payment of franchise fees often brings us the right to get assistance related to the start and operation for a business. It is always along with some supporting services.
Franchise Royalty Fee.
When we talk about franchise royalty fees, it is usually regarded as an ongoing fee for franchisees. Sometimes, it is also referred to as franchise management fee or service fee.
Commonly, franchisees can get the same rights for intellectual property, trademark, techniques, copyright, distribution, sales, and other stuff after paying this kind of fee.
The franchise royalty fee is often regularly paid for franchisors, by monthly in general. In addition, it represents a certain percentage of the gross volume or turnover.
What franchisees can receive from paying such fees is the continuing right to use things like operation and trademarks.
However, the term for franchise royalty fees usually depends on the agreement signed between franchisors and franchisees.
Negotiate franchise royalty fees.
Negotiating franchise fees or negotiating franchise royalty fees is a must.
It is of necessity extremely before we negotiating franchise agreements.
Now you may come up with some questions to ask when negotiating a franchise like Are franchise fees negotiable?
Yes. Franchise fees for franchise period, range, types and else are all negotiable. Different franchise contents have different kinds of fees.
Even on franchise agreement Duties, obligations, restrictions, terms, and time limits are negotiable.
Once you have a good understanding for your franchise brand, many things can be clearly negotiated, not only franchise fees actually.
Here are some considerations that franchisees should be taken into account for the franchise royalty fee negotiation.
1.Before you sign the Agreement!
Draft, negotiate, and sign an agreement is one of the crucial parts. Price negotiation agreement in a franchise is a good example.
Price should be negotiated in every business. In order to ensure the rights and obligations for both parties,
agreement for the price is a necessary element. Prices for franchise, management, training, and supports shall be listed out clearly.
Agreement termination plays an important role as well. Before signing a franchise agreement, terms and conditions for terminating that should be carefully considered.
2. Do your market research.
Doing market research before negotiating franchise royalty fees contributes to your better understanding of it.
References for relevant industries, inspections, understanding of the brand, and risks are essential.
Do research on franchise prices. Compare with more franchisors and you can get more ideas from it. After the choose the one suitable for you. But with XIMIVOGUE only a small investment can you franchise your business with great profits.
3.Rights relevant to the franchise
Franchisees are allowed to get some rights from franchisors once they sign the agreements.
Let’s take the master franchise as an example. Intellectual property rights, trademarks, floor plans, techniques, design, service, and other rights shall be negotiated.
Besides, rights for franchise range, period, stores, and something else can be normally divided into 3 categories: inclusive, exclusive, and common rights.
4.Rules and restrictions
What happens during franchise negotiation is talking about rules and restrictions.
For some situations, franchisees may receive given rights, such as general using rights and limited use rights.
Restrictions can also be found for regions, time for business, trade secrets, conditions, store locations, and so forth.
In summary, price, use limit, obligations, terms, and conditions, as well as restrictions, are those we shall care about when negotiating royalty fees. What’s more, risks and understanding for relevant brands are serious stuff to be considered.
Article Source Franchise Blog