Royalty in Franchising – Royalty Payment & Service Fee

For franchisees, royalty payment is the easiest and most profitable way to be able to get service.

It may seem odd at first glance, but before moving on to a description of the sentence, it will be useful  to remember what are the benefits for franchisees in franchising system.

  • Start Your Own Business; Be the boss easily.
  • To be part of the system; You’re member of a Big Family.
  • Tried, proven business; Simply execute the system. They already succeed.
  • High standards; Raw & finished product Quality, quick & smily service, spoutless cleanliness etc.
  • Well-known brand; You’re not starting from zero point.
  • Ability to enter unfamiliar work; Actually it’s preferable situation to be able to adopt the system.
  • Initially receive training; Know your business and let your employees know that you’re capable.
  • Financial and legal support; Franchiser supports you in these issues too.
  • Technological development; Ready to use technology on your hand.
  • The selection of location; Franchiser knows the right place and gives the verification.
  • Efficient joint advertising; National wide marketing although you’re single or small.
  • Efficient local promotion; Analyse needs, choose the best option and execute.
  • Royalty Payment - Service Fee
    Royalty Payment – Service Fee

    Supervision, evaluation and auditing; Area supervisors visiting and auditing, evaluate your ability to execute business.

  • Ability to compare yourself; You can compare your business with your region, country and even world wide.
  • Management techniques; Franchiser teaches you how to run your business.
  • Reporting; It’s very important to analyse your business results especially profit ones.
  • Low investment; Compared with gains, investment is low. Because of that ROI is also short.
  • Realistic investment plan;
  • Purchasing advantages; Low cost advantages because of purchase power of franchiser.
  • Quickly to reach profitability; Quicker to reach high volume sales doing national and local marketing activities, efficient managerial cost controls ( yield, waste, ordering etc. ) using system tools.
  • Customer loyalty; When you get franchise from franchiser actually you get also customer loyalty.
  • Reputation; You get also good reputation from franchiser.
  • Regional protection; Your agreement provides you regional protection.
  • Low risk; Your risk is low compares to nonfranchise investment.

All of these benefits can be provided to a franchisee by an organization. In this organisation ( Head Office ) there are many departmants like finance, business development, operations, training, marketing, constructions, equipment, franchising, human resources, purchasing, research & development, quality assurance etc.  All department’s staff, general administrations and top management work for company and franchisees to make their business easy and profitable.

If franchiser is strong enough, it will be able to support its franchisees and develop the system. Royalty payment (Service Fee) is fuel of the main system.

Let me explain what does it mean the sentence that l used at the beginning. Franchiser uses all staff for benefit of every franchisee. This style provides time to franchisee to take care internal and external customer, to build sales and profit issues etc.

Royalty is like the root of the tree. If the root is healthy  and strong enough, it will be able to protect and develop the body and branches of the tree.

Last words, you should look at “ service “ not “ service fee “.

You can come back to Franchise category or get more information about TFC Consultancy

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