The Educated Franchisee by Rick Bisio

Author:Rick Bisio
Language: eng
Format: mobi, epub
Publisher: Hillcrest Media Group, Inc.
Published: 2015-11-20T09:42:15+00:00

An observation about royalty levels

Sometimes a potential franchisee will do research about franchise companies in the same category, let's say cleaning services, and will find their eyes trained on the direct comparison among royalty payments. If they see low, medium and high royalty payments for three different companies, they may be inclined to think the one with the lowest royalty payment is the best choice.

Without more complete information, those figures can be misleading. Royalty payments will figure into the business as a line item expense, nothing more. The important factor to focus on is the profit—what you take home at the end of the day. The questions you need to ask yourself are these: What is the difference? What am I getting from one company that I'm not getting from another?

You will find that many successful, high quality franchisors have a higher royalty than their less successful competitors. The higher royalty is frequently reinvested back into the business and the system becomes stronger as a result. These companies often have superior service to both end-user customers as well as franchisees. In some cases a higher royalty may be well worth it.

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