what is a franchise fee

A franchise fee is a one-time payment made by a franchisee to the franchisor for joining the franchise system, usually upon signing the Franchise Agreement. It is the cost of admission to use the franchisors brand, trademarks, products, and business model. The franchise fee is typically a flat payment as opposed to a percentage royalty, and is used by franchisors to offset the franchisor’s franchisee start-up costs, marketing for franchisees, and other corporate expenses. The franchise fee can be any amount above $500 and is generally in the range of $10,000 to $50,000, although it can be much higher for master franchises. In addition to the franchise fee, there are other fees associated with owning and operating a franchise business, including marketing fees and royalties. Royalties are ongoing fees that the franchisee pays to the franchisor for continuous support, and are usually assessed as a percentage of gross sales.