Most (if not all) Franchises have a franchise fee, (it’s a monthly fee usually) designed to keep the head office “humming”. It’s generally separate from a marketing fee, but that might be on the same invoice you get per month. So what do you get for paying that? I guess the Franchisor will have an answer for you that “covers their butt” but in reality what do you get?

Look, some will suggest I have put on my cynical ‘hat’ and am talking sour grapes… Perhaps that has some truth to it. BUT it’s a great issue and one that all current and prospective Franchisees should be asking about sooner rather than later, and one that Franchisors have to be acutely aware of. Think of how many Franchisees are in a group and then look at how many franchises there are world wide, and growing! the amount would be staggering per month.

So you shell out a management fee per month?

• Perhaps you will get a support person to watch over a bunch of Franchisees – If that happens in your franchise group, does the number of support people match or better the industry average? How often will you see them? how specifically will they work with you? Have they been a franchisee before ? Or are they bringing employee mentality and or attitudes to the role…?
• Perhaps it goes into developing new systems – Things change so that can be useful, but what if someone created a new system and it failed, you still paid for it? Perhaps the new system will save you a fortune, in time or money…?
• Perhaps the fee goes into organising the annual conference – If you have one, but wait that’s usually a separate fee… so the organising cost should come out of there? SHOULDN’T IT? Whoops a slight oversight from head offices viewpoint.
• Perhaps it goes into training – You go to the franchise meetings don’t you? well you get training there??? hmm maybe not… Well at least your fees go to the meeting room hire.
• Perhaps it goes into the end of year function… – Well for some it might, but for others well that’s separate, so no joy there.
• Perhaps it goes into a marketing development fund – No that’s surely under the marketing fee. so if the Co is spending management fees on marketing there is a false economy going on… Perhaps the Co should be altering the management fee amount down and the marketing fee up, same total but different results, one more accurately reflects the real situation.
• Perhaps it goes into building a new head office – Hey why aren’t they leasing? There are tax benefits to that in most places… Oh the CEO has a company that is into real estate development, oh that’s a bit different… no?
• Perhaps the company wants to create a great web presence complete with franchisee intranet – Better hope they pick the right sort of web developer or the $$ might just be going out the window… or is that Windows® he he.
• Perhaps some is going into a debt reserve fund, or a weatlth development fund so the company can build its cash wealth and not just its branches and image.
• I know, it goes into processing the monthly fees!

The point. To find out where the money goes, it should be available to the franchisees as a graph, a pie chart or similar so they can know where the money goes, and so their Franchise Advisory Council can advise based on facts, not on here say and good will.

Is your Franchise group showing you the “money…” or are they showing you a chunk of “PR” that makes the “money” look good?

For more information on franchising.