How To Determine If Your Initial Franchise Fee Is Really Appropriate?

Many franchisors (especially new franchisors) often ask us what an appropriate amount would be for their initial franchise fee.

Obviously, because every franchisor is different and, even more so, because the initial services differ from one franchisor to another, there is no single answer to this question.

However, here are some principles to guide any franchisor in determining its initial franchise fee:

1. The initial franchise fee should not be a source of profit for the franchisor, but rather a means of recovering various costs.
   
   Rather, a franchisor's sources of profit should be from its royalties and from the various goods and services it provides to its franchisees.