Reading time: 3 minutes

The franchise model works on the basis that franchisees are able to conduct business under a specific brand and system that the franchisor has developed with success. As franchisees are provided with a right to work under this business, there are not only specific obligations that need to be met, but also franchise fees.

What is a franchise fee?

The franchise fee usually refers to the initial upfront fee paid as a result of entering the Franchise Agreement. This fee depends on the size and the value of the business and usually varies quite significantly across different industries. The Disclosure Document that you receive should outline the fee to be paid, but should also detail the down payment of a deposit, the final due date for payment of the fee and also whether or not the fee is refundable.

The initial franchise fee can be a negotiable part of the Franchise Agreement. This is because franchisors generally do not make a profit as a result of the fee. If you have considerable experience in business or can bring significant benefit to the franchise as a whole, the franchisor may be open to considering a reduction in the initial franchise fee.

A franchise fee can also refer generally to all the ongoing fees that may be required as a franchisee. One of the more important and regular fees would include royalty fees. The royalty fees are generally paid each month and are usually required as a service fee to the franchisor.

An advertising or marketing fee is also a common requirement. Franchisors usually need to set up a marketing or cooperative fund and will determine which franchisees are required to contribute to the fund and how much needs to be contributed. Like the royalty fees, the marketing fee is usually paid monthly. The marketing fund may be subject to audits and franchisees may be able to access details of the fund. The marketing fund is used for expenses such as creating and implementing promotional campaigns, conducting market research and possible disbursements to advertising agencies, or legal or accounting services.

Training

Franchisors often provide an initial training program shortly after franchisees enter into the agreement. The initial training program, alongside any other training requirements are necessary for maintaining the success of the franchise and in order to ‘on board’ the franchisee, whether that be in terms of up-skilling for business requirements or for understanding how the franchise wants to represent itself. Although initial training programs are at the expense of the franchisor, franchisees may be liable for paying for ongoing training.

Conclusion

There are various franchise fees involved when you want to operate a franchise. The Franchise Agreement and Disclosure Document are detailed legal documents that outline your responsibility as a franchisee to pay these fees, but also outlines your rights relating to how the fees will be used and your access to information. Our team of expert franchise lawyers can help in reviewing your franchise documents so that you are sure you know all the legal obligations you have as a franchisee!

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards