In the world of franchising, one of the things that comes up quickly is royalty payments (and other franchise fees). While some may see the franchise royalty payment as a negative thing, or just the cost of doing business, there are a lot of reasons why it is actually a good model.
For one, you get to use the franchise trademarks.
It can be very hard to start a new business from scratch, so being able to piggyback off of a brand and its notoriety is very valuable for the franchisee. And it’s hard to gauge just how valuable it can be.
For a franchise like McDonald’s, a store owner doesn’t need to necessarily market to the community and neighborhoods in order to draw traffic. By simply opening up their doors, and putting the golden arches on top of their building, they will typically draw in customers. Paying a fee in order to use a trademark like McDonald’s is often well worth the cost.
Another reason the franchise royalty payment is actually a good thing is because of the systems education and operations manual you receive from the franchise.
This franchise has spent countless hours and countless dollars figuring out how to run the business successfully. It has then taken those lessons, created systems of operation and put those in place in a replicable way. The operations manual and the systems that the franchise has built help ensure the franchisee is successful. Most people aren’t intuitively great at running a business all on their own. Having help – in the form of proven systems and documentation – help make the franchisee successful, and the franchise fee worth the cost.
There are a lot of other reasons why the franchise fee is a great trade-off for many different great franchises. It doesn’t mean that’s the case for every franchise, because some franchisees pay a franchise fee and don’t get much in return in terms of systems, or marketing benefits, or a trademark and brand that people recognize.
If you have any questions about franchising a business, or how to make your franchise grow to the next level, give us a call. We offer a free initial consultation.