Franchise Fees Vs. Royalties: What’s The Difference, And Where Does That Money Go?

franchise fees royaltiesThere is a seemingly endless list of things that need to get done to start a business. Beginning from scratch can be a particularly daunting and difficult task. The pitfalls are varied and vast. One of the most challenging aspects of the starting a new enterprise is the investment involved — time, energy and, of course, money. A franchise (Bin There Dump That franchise in particular) is a great way to get more for your investment dollars.

One of the first questions franchise operators ask is, “Where do my franchise fee and royalties go?” It’s a fair question, one we’re happy to answer. One of the more appealing aspects of purchasing a franchise is that much of the hard work has already been done. When you become a franchise operator, your business model is not only fully developed it’s also fully proven. Through the years, Bin There Dump That has fine-tuned the process. We learned what works and what doesn’t. Our approach has been managed and modified; it’s been tweaked and tested. We know it works.

While some business owners are spending their money figuring out what needs to get done, a Bin There Dump That franchise operator is investing in a proven system. But you’re getting far more than just a business plan with your license fee.

Here’s a quick guide to understanding these costs.

Understanding the Franchise Fee

Canada-moneyMany first time entrepreneurs confuse the investment in a franchise as a purchase of physical property, when what a franchise represents is intellectual property. The real value in a franchise is that you get a fully formed, proven business model. An effective business model is the difference between success and failure.

Those starting a business from scratch might have plenty of business skills and a seemingly solid business plan. But until the operation is up and running the business plan is primarily speculation. You don’t know what will work until the plan is put into action. And every time something doesn’t work, that’s money that’s not coming back. Sure, you’ve learned a lesson, but the question is how many lessons can you afford to learn before success comes? It’s often been said you learn more from failure than success. That might very well be true, but having the equivalent of an MBA isn’t going to be of much use if all the money is gone and the business fails.

The costs associated with perfecting a business model will almost always eclipse the cost of paying a franchise fee.

What Are Royalties?

The license fee helps ensure that the franchise operator gets off to a successful start. The royalty fee makes sure that success continues. Management at Bin There Dump That has a vested interest its franchise operators’ successes. The royalties help provide ongoing support, which includes continual improvement of the business model, access to vendor discounts, product research and development, marketing and advertising programs, along with other benefits.

The royalty fee pays for itself with the savings realized when the franchise operators purchases goods and services for the business at below market, national account rates. Go it alone and your costs would be considerably higher than they will be as part of the Bin There Dump That family.

Most franchise operators will also experience much higher sales than they would as a private company — generally well in excess of 8%— because of the business’s well-designed, established marketing strategy.

Franchise Ownership: Worth The Price

The fees and royalties associated with being a franchise operator shouldn’t scare you off — a lot of legwork went into creating a successful business for you to buy into!

Learn more about becoming a Bin There Dump That franchise operator on our website. Or, if you’re ready to take the next step, download our free franchise kit.

Image credit: American moneyCanadian money

Leave a Reply

Your email address will not be published. Required fields are marked *