Every person in business faces the dichotomy of franchise fees whenever they think of expanding. In this regard, both the franchisor and the franchisee have a lot of factors to consider- if you decide in haste, without proper calculations of the outcome, it might lead to disadvantageous situations for both parties.

An aura of misconceptions and false notions always surrounds the idea of franchise fees. To get a clear sense of the term, you need to delve deeper than the basics.

What are Franchise Fees?

The upfront amount that you need to pay in order to settle the deal and buy the franchise is known as the franchise fee. It is actually the license fee you need to own the business and operate it legally. If you are interested in buying a window franchise to open near you, the franchise fee can range from $35,000 to $55,000, depending on the brand and the type of franchise. This license fee is not the only amount you will have to pay while purchasing the business- it is just a part of the bigger amount required to set up and start the franchise.

The Types of Payments to be made When You Own a Franchise

When you buy a franchise from a company, you are known as the franchisee, and you are supposed to regularly pay a percentage of the profits you make to the franchisor. This compulsion might sound unfavorable, and there is a lot of ongoing debate regarding the matter.

As an owner willing for a window franchise to open, the regular fees that you have to pay to the franchisor can fall into two groups-

1. Marketing fees
2. Royalties

Let us see how to calculate them.

1.     Marketing Fees

If you are planning to purchase a window franchise to open, the first and foremost factor to keep in mind is the brand name and reputation of the parent company. If the company has already successfully established itself and garnered a respectable amount of appreciation, it will work as a catalyst in the growth of your franchise. To receive constant guidance and support, learn their profitable business methods and mechanisms, and use their trademarks, you will have to pay a marketing fee to the franchisor.

This marketing fee is a monthly payment generally based on the monthly revenue you make. You have to pay a percentage of the revenue. Supposedly, your monthly revenue is $30,000, and the franchisor charges a 2% marketing fee, then you will have to pay $600 per month (about $72,000 annually). Thus, before you commit to a business, make sure their marketing strategies are beneficial and profitable- if not, there are high chances you might run a loss.

2. Franchise Royalties

Franchise royalties are compulsory monthly payments collected by the franchisors. It serves as a regular source of income for the franchise brand and has to be calculated keeping in mind the profit of both parties. Franchisors generally denote the royalty fee either as a percentage of the turnover or gross profit or as a fixed sum.

When a franchisor terms the turnover percentage as a royalty fee, it becomes easier for them to maintain a record of the sales and hence the possible amount. When this continues, the franchisee might face a problem if the enterprise cost shoots up. In case of window franchise to open, these types of franchise royalties range from 4% to 12% of the revenue. The fixed percentage method has a disadvantage- here, since the fee depends on the franchisee’s profit, it might keep rising along with the business’s success. To prevent this, you must set an upper limit on the fee. In this way, after the fee reaches this limit, it will no longer increase, even if the franchisee’s profit does.

In most cases, a fixed sum royalty fee proves profitable for both the franchisor and the franchisee. The franchisee pays the same amount as a fee each month, irrespective of the sales they make. But even if the business fails to do moderately well in a month, the franchisee will compulsorily have to make the designated payment. Initially, it might seem strenuous, but ultimately as the franchise business grows, both franchisor and franchisee profit from it.

Conclusion If you are looking for a window franchise to open, you should look into Window Medics. We are a low-cost window and glass business franchise offering a reasonable $35,000 for the licensing fee. Our brand has already received global recognition with our reliable and high-quality service and patented glass defogging and restoration process. Doing business with us will benefit you in various ways- your entrepreneurship career will get a boost, and you will earn a steady profit right from the start!