Creation of Revenues allow for rapid brand expansion. Franchise Guardian® identifies the many revenue streams franchising can generate for your brand. Take an inside look at real figures to consider.
When creating your franchise agreement
We will determine your fees and Frequency.
Franchising provides many revenue streams, however, each franchise model is different, hence some models have more and some less, but below is generally what you can expect.
Below is a list of revenue streams that you can look forward to as a Franchisor;
Franchise fees can vary vastly. The average franchise fee is $35,000.00 per unit, (NON-REFUNDABLE) but can be considerably more. We will work with you on establishing this number based off of analytics we have in your sector. Once you grow, we can adjust all figures.
Monthly Royalty fee;
The average royalty fee is 7% of gross revenues monthly. Example; if your location is generating $50,000.00 in revenues each month, with a 7% royalty fee, your Franchise would generate $3,500.00 in royalty fees per location per month. Based off of industry analytics, we will work with you on establishing the best starting fee.
Monthly Marketing fee
The average marketing fund fee is 2% of gross revenues monthly. Example based on the above generating $50,000.00 in revenues monthly, equals $1,000.00 per location. We will decide which is the best starting fee for your model.
Monthly Distribution earnings
When franchising you can elect to be the sole distributor of all products, this would be set forth in your Franchise agreement, operating manual and Franchise disclosure document. This would most likely be your largest revenue stream. If you have not established distribution systems, we will facilitate you in creating them. Furthermore, your cost of goods, your services or your general operational cost through distributors or manufacturers would be significantly reduced. This is because your distributor or manufacturer know that you are now a more valuable client that will be growing and ordering much more for all of your franchised outlets and Corporate locations.
Area development/Multi unit development fees
This fee would generally be the franchise fee times the number of units developed. We will work with you to set the amount for these agreements.
A master franchisor is an entrepreneur who pays a franchisor a fee in exchange for an agreed territory. Master Franchisors are very common in growing franchises and are valuable players in your brands expansion. For example; John doe wants to purchase a state-wide exclusivity term with your franchise. John Doe and the CEO work out the details as too how many units yearly would need to be procured in order to keep the exclusivity agreement binding. The Franchisor would be payed a portion of the franchise fee for each unit up front (Generally lower than a single unit because the master franchisor will be responsible for rapid growth in the exclusive territory, along with the marketing expenses to do so) you will receive the negotiated royalty fee for each unit, along with all applicable fees in your franchise agreement. We will work with you in ensuring the deal is fair and you are protected. This particular stream of revenue is significant, valuable and adds more value to the brand due to the rapid growth generated by such arrangements.
Yearly marketing fund contribution
Because your brand is now playing on a national or international level, you will have to compete as such. This will inherently increase your marketing expenditures. While creating your franchise agreement, we will discuss how much each unit will have to contribute into the national marketing fund and the frequency (the average is two times per year from each franchised outlet that will be required to contribute). National marketing funds are instrumental in growing your brand and fair for both the Franchisor and the Franchisee. The more you grow, the more value each unit becomes and the more awareness of the presents of your brand will increase business for each location, a win win for both parties. Take McDonalds for example, their Franchisees have to do little to no local marketing because the franchisor has created a name everyone knows and trusts, this was possible through a perfectly executed franchise agreement setting forth these obligations and bringing value to each unit. We will establish the frequency and the amount of your marketing fund in the beginning stages.
Due to the high volume of any goods purchased to operate your franchise model will be reduced significantly. This figure is normally between 15-50%. Inherently this will lower cost for your corporate locations, allow for you to profit from each franchised outlet, and will increase your NET on all corporate locations (affiliates).
Here is a itemized snapshot of revenue streams franchising your model will create and how to arrive at these figures;
Your monthly GROSS times 7% equals your monthly royalty fee
Your monthly GROSS times 2% equals your monthly marketing fee
The amount of a single months revenue times 15%-25% Depending on your sector for Distribution revenues.
Your yearly marketing funds (can be as high as 10k per unit yearly)
Your Franchise fee times projected units sold
Please note; the number depicted can be very low for your business, very high or average. Please use these figures as a reference only. We will work with you to establish what your franchise fee should be based on your marketplace and competition. In any event, please use our calculator or run yours using this formula to guide you in determining how much projected revenue your franchise model can generate.