{"id":1326,"date":"2022-01-09T22:08:37","date_gmt":"2022-01-09T22:08:37","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1326"},"modified":"2024-05-22T06:52:09","modified_gmt":"2024-05-22T05:52:09","slug":"franchise-fees","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/franchising\/franchise-fees\/","title":{"rendered":"How Are Franchise Fees Calculated in the UK?"},"content":{"rendered":"\n<p><span style=\"font-weight: 400\">If you <a href=\"https:\/\/legalvision.co.uk\/franchising\/best-time-to-franchise-a-business\/\">enter into a franchise agreement<\/a> as a franchisee, you will come across <a href=\"https:\/\/legalvision.co.uk\/franchising\/what-franchise-fees-will-i-need-to-pay\/\">franchise fees<\/a><\/span> <span style=\"font-weight: 400\">as part of your deal. Franchise fees are a <a href=\"https:\/\/legalvision.co.uk\/franchising\/working-capital-prospective-franchisee\/\">cost that you have to pay<\/a> as part of an agreement. The fees will vary between different agreements, depending on:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400\">the amount of money that a franchisor expects a franchisee to pay; and<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400\">how the franchise fees are calculated.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400\">As part of your franchise fees, you will usually have to pay an initial fee, <a href=\"https:\/\/legalvision.co.uk\/franchising\/franchise-marketing-fee\/\">marketing fees<\/a>, and sometimes, an ongoing franchise fee. This article will explain some points to keep in mind if you are considering a <a href=\"https:\/\/legalvision.co.uk\/franchising\/signing-franchise-agreement-what-should-i-know\/\">franchise agreement<\/a><\/span> <span style=\"font-weight: 400\">and want to know more about franchise fees.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Franchise Fees<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">As a prospective franchisee, you can expect to pay costs concerning your franchise agreement. You may be wondering how much the franchise agreement will cost.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">The first point to remember is that the exact fees you can expect will vary between different franchisors. You can expect to pay, at the least, an initial franchise fee followed by ongoing royalty fees. Royalty fees are usually either monthly or yearly costs.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What is the Initial Franchise Fee?<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">The initial franchise fee reflects the amount of money that you pay to use the franchisor&#8217;s brand, trade mark, or other intellectual property. The initial fee will also usually cover the training that your staff will receive as part of the franchise agreement, as well as access to the business expertise of the franchisor. The business expertise can take the form of advice, access to a handbook or manual, or contact with members of the franchisor&#8217;s business.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">The amount of money you can expect to pay will depend on how big and successful the franchisor is, and often, how much the franchisor is trying to expand their business. For example, the <a href=\"https:\/\/legalvision.co.uk\/franchising\/benefits-joining-franchise-association\/\">British Franchise Association<\/a> estimates that the average initial franchise fee is around \u00a340,000.\u00a0<\/span><\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+448081968584\" class=\"not-prose\">0808 196 8584<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    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This will be structured in different ways, such as a set fee or a percentage of sales.<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">A set fee is where you pay a predetermined amount each month. On the other hand, if the fee is a percentage of sales, the percentage can be up to 20% but is usually around 7-8%.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400\">The franchisor will document the ongoing fees structure in the <a href=\"https:\/\/legalvision.co.uk\/franchising\/how-should-i-use-franchise-disclosure-document\/\">franchise disclosure document<\/a><\/span> <span style=\"font-weight: 400\">and the franchise agreement, so it is a good idea to do your research before agreeing to start a franchise business.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If the fee is a percentage of sales, you should be very cautious of how that will impact your business. A percentage of sales will be more than a percentage of profits. This can hurt your profit before you have even started calculating it.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"box box--icon box--star\">\n<p><span style=\"font-weight: 400\">When negotiating ongoing fees, you should have confidence that the franchisor has an ongoing interest in your business performing well. A franchise agreement works well when the franchisor is involved in the franchised business and can offer expertise and guidance.&nbsp;<\/span><\/p>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400\">Finally, you should be cautious of a franchisor who tries to make it so that they can claim the ongoing fees earlier. This can also hurt your business heavily, and the franchisor may abuse this.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">What Other Costs Can I Expect in a Franchise Agreement?<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Besides the initial and ongoing fees, you may also come to more financial agreements with the franchisor, depending on the details of your franchise agreement. It is usually a good idea to get someone with franchise experience if you plan to negotiate the terms of the franchise agreement.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">Some franchisors may charge unexpected costs, such as fees for the correct uniform as part of the franchise business. You may also have to make minimum stock purchases as part of the agreement, which can also be costly.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">In sum, you should make sure that the franchisor clarifies all costs you must pay. It is usually a good idea to try to negotiate some of those terms, especially if you have expert franchise or legal advice on your side.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400\">Franchise fees will usually involve an initial fee, followed by ongoing costs and royalties. You may also have more obligations that require you to make payments, such as uniform compliance or minimum stock orders. Your franchise fees will usually be in the franchise disclosure document and franchise agreement, so you should make sure that you have read this thoroughly and negotiated points in your favour if you can.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400\">If you need help with <\/span><span style=\"font-weight: 400\">franchise fees<\/span><span style=\"font-weight: 400\">, our <\/span><a href=\"https:\/\/legalvision.co.uk\/franchise-lawyers-lp\/\"><span style=\"font-weight: 400\">experienced franchise lawyers<\/span><\/a><span style=\"font-weight: 400\"> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.uk\/membership\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1641765936181\"><strong class=\"schema-faq-question\"><strong>What is an ongoing fee?<\/strong><\/strong> <p class=\"schema-faq-answer\">Ongoing fees are weekly, monthly, or yearly payments that you will make to your franchisor as part of your franchise agreement.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1641765947759\"><strong class=\"schema-faq-question\"><strong>What is an initial franchise fee?<\/strong><\/strong> <p class=\"schema-faq-answer\">An initial franchise fee is a cost you will have to pay at the start of your franchise agreement. The average cost is usually around \u00a340,000, but this will vary depending on your agreement.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"488c9024c8\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1326\" \/>            <input value=\"https:\/\/legalvision.co.uk\/franchising\/franchise-fees\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"How Are Franchise Fees Calculated in the UK?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>If you enter into a franchise agreement as a franchisee, you will come across franchise fees as part of your deal. Franchise fees are a cost that you have to pay as part of an agreement. The fees will vary between different agreements, depending on: As part of your franchise fees, you will usually have<a href=\"https:\/\/legalvision.co.uk\/franchising\/franchise-fees\/\">Continue reading <span class=\"sr-only\">&#8220;How Are Franchise Fees Calculated in the UK?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13325,"featured_media":537,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"892,3269,1737,2047,2541,1596","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[33],"tags":[21,57,59,242,243],"class_list":["post-1326","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-franchising","tag-medium-business","tag-franchising","tag-franchise-fees","tag-royalties","tag-set-fee"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How Are Franchise Fees Calculated? 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