BRITISH FRANCHISE ASSOCIATION NEWS
The UK’s voluntary self-regulating governing body for franchising
Understanding franchise fees
The bfa advises on what you’re getting for your money I
f you are researching franchising, you’re probably looking at a number of sources and, within this magazine alone, you’ll find businesses advertising their franchise opportunities with details about the fees or cost of investment. But you should be aware: not all fees are calculated equally! That’s not to say that franchises are trying to mislead you. It’s simply that, with over 900 brands using the model, each has different requirements, tools and products to make it work for them and inevitably that leads to differences in how they quote their fees to you, their prospective franchisee. That’s because some may be quoting the all-inclusive cost of starting the business, while others might advertise only elements of that total fee. Why, you might ask? It becomes a little clearer by looking at some examples.
Take a retail premises franchise. The cost of fixtures and fittings can vary widely from store to store depending on size and location, so it can be misleading to include them on an advert or website; a vehicle- based franchise might be quoting fees including only the initial repayment cost for a vehicle, whereas a competitor quotes for the total repayment cost for a similar vehicle. Unfortunately, this isn’t a one- size-fits-all scenario. So how should you approach things?
Checks before cheque First of all, you need to be very careful about comparing costs when you don’t fully understand what lies behind them. Don’t write anything off from the costs alone and don’t commit to a franchise opportunity on that basis either. Do your research in full, ask lots of questions and get the full
measure of the fees and what they cover. Specifically, check which of the following are included, where relevant to the operations of your potential franchise business:
• Franchise fee (the fee to use the brand, system, etc)
• Any necessary equipment (stationery, machinery, office equipment etc)
• Any necessary initial stock • Initial training • Initial marketing or sales launch • Any necessary property costs, including fittings (average)
• Any necessary vehicles (specified whether this is the total cost of the vehicle or the first repayment if on finance)
• Any necessary subscriptions/ memberships/licences
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Businessfranchise.com | July/August 2014
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