Royalties, marketing levies and the true recurring cost
Two franchises with similar entry prices can produce very different economics once ongoing charges are included.
Map every recurring charge
Royalties may be a percentage of sales, a fixed fee or a hybrid. Marketing levies, technology subscriptions, minimum purchases, training and renewal costs can sit beside them.
Ask what the fee buys
Request clarity on support, national marketing, lead generation, software and buying power. A fee is not automatically poor value, but its purpose and calculation should be clear.
Model the margin
- Calculate charges at low, expected and high turnover.
- Check whether fees are based on revenue or profit.
- Include VAT where applicable.
- Understand minimums when sales are weak.
- Test the economics with an independent accountant.
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