{"id":1444,"date":"2016-07-29T21:10:13","date_gmt":"2016-07-29T21:10:13","guid":{"rendered":"http:\/\/www.thefranchisemaker.com\/learningcenter\/?p=1444"},"modified":"2025-01-09T19:23:50","modified_gmt":"2025-01-09T19:23:50","slug":"making-sense-of-the-franchise-fee-and-territory","status":"publish","type":"post","link":"https:\/\/www.thefranchisemaker.com\/learningcenter\/making-sense-of-the-franchise-fee-and-territory\/","title":{"rendered":"Making Sense of the Franchise Fee and a Franchise Territory"},"content":{"rendered":"

There’s a common misconception out there that when a person buys a franchise, the franchise fee that is paid by the person buying a franchise is contingent upon the size of the franchise territory that is awarded. While this is currently not the case, there was a time years ago, when franchisors charged a fee just for the franchisee’s territory. Why has his practice gone by the wayside? Well, ask yourself, what was the franchisee really paying for, AIR??\u00a0<\/span><\/p>\n

Are You Selling Air?<\/h2>\n

The idea of charging someone for airspace (for example a cost per thousand people in a population) disappeared long ago mainly because it was an unsubstantiated fee. In fact, nowadays, some franchisors don’t give a franchise territory at all, so the notion that the franchise fee is based on territory size alone doesn’t make sense (read “How the Franchise Fee is Determined<\/a>“). <\/span>The franchise fee is by definition a reimbursement for the time, energy and money that the franchisor spends to train, recruit, market and bring on a new franchisee into the franchise system.<\/span><\/p>\n

Therefore, the franchise fee is really determined by the\u00a0deliverables\u00a0<\/em>the franchisor is providing to the new franchisee. While the franchise territory may be one of the deliverables, it is only part of the whole package.<\/span><\/p>\n

What Are Deliverables?<\/span><\/h2>\n

Typically franchisees expect that when they jump into a franchise system they are given hand-holding guidance from day one, all the way through the process to get the business set up to the day they open for operation. Therefore, the franchisor is expected (as part of this relationship) to provide the franchisee with assistance, guidance, support and anything else the franchisee needs to successfully open his\/her business (read more about a franchisor’s role<\/a>). This includes whatever time and resources the franchisor has to make available to the franchisee. Let’s explore what are defined as “deliverables.”<\/span><\/p>\n