In franchising there are fees of all kinds, franchisees are contracted to pay. Marketing and Management fees are often the main ones.

The fees are used for a multitude of things and are vital for the main company’s day to day operation. The money is therefore a fee paid for the provision of some service, the right to use the brand etc. I would like to put forward an idea to make a positive difference to the franchises.

Many franchises offer successful business opportunities (that’s why most people buy a franchise), however research shows there is a fair bit of turnover in the industry as people discover that franchising may not be for them (for whatever reason and there are many).

To offer a start up incentive, lots of franchises also offer an income guarantee for a start up period and then the franchisee is out on their own and hopefully running the business very profitably by that point.
All seems well, until… something goes awry, and the franchisee wants to pull out… “No you can’t do that the contract says you keep on paying fees until the end of the contract period,” for some this is a burden they endure even though they are no longer in the franchise. The pain is felt on both sides

Suggestion, the management fee could include an amount that goes into a Franchisee debt reserve fund (it’s just a compulsory savings account really) and over time as it’s added to, it could build into a sizable amount. If for instance $50 per month was taken from the management fee to add to this fund the amount is not noticed (for most) and it compounds with interest on top of that.

At the end of the contract if the person pulls out they get their compulsory saving back (no more, no less) if they continue on they could be eligible to take just the bank interest on that amount out and use it how they wish. The advantage is they have a device that is growing for them, if they pull out altogether they get the basic amount, if they stay in it gets much bigger as it compounds.

I am not putting the idea forward as a complex device, in fact the simpler the better (one big account in trust) and separate balances each month.

The aim, to put forward the idea of wealth development, and then make sure they are doing it in their business by the Franchisor leading by example. In a complex business environment it’s of ten the simpler innovations that make the biggest difference.

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