If you prefer to download the entire article in a print-friendly PDF file, just click HERE. You will need the free Adobe Acrobat Reader or a similar program to view it.

Ongoing royalties should represent good value to franchisees.  In return for the fees, the major returns on investment received include: 

• administrative and logistical support services from the franchisors
• business plans that are constantly being refined and enhanced
• constant product research and development
• intense training that keeps franchisees “ahead of the curve”
• the benefits of collective purchasing
• brand and name protection
• participation on franchise teams where fellow franchisees are peers, not competitors.

Franchise fees and royalties frequently are used for marketing and advertising programs to attract new customers.  Those programs benefit individual franchisees who likely could not afford such extensive efforts as individual business owners.

Simple tasks such as designing and printing stationery, acquiring appropriate insurance coverage, implementing personnel policies, and setting up inventory control systems, etc., are important to business success.  Franchisee fees and royalties insure that those mundane, yet vital, tasks are provided for franchisees.  Such tasks too often are put on the back burner or slip through the cracks for independent businesses.  They often are done poorly, or not at all, and the businesses suffer.

Copyright 2008 © Business Financing Network