{"id":1701,"date":"2020-12-20T11:59:48","date_gmt":"2020-12-20T11:59:48","guid":{"rendered":"https:\/\/nz.legalvision.com.au\/?p=1701"},"modified":"2021-03-10T18:37:47","modified_gmt":"2021-03-10T05:37:47","slug":"how-to-calculate-franchise-fees","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/franchising\/how-to-calculate-franchise-fees\/","title":{"rendered":"How Are Franchise Fees Calculated?"},"content":{"rendered":"\n

As a franchisor, you need to ensure that your franchise locations are successful and receive an income. To ensure that the amount spent on the franchise does not outweigh your income, you will likely have a franchise fee system<\/a> in place. A franchise fee is an ongoing payment, typically made by the franchisees. This will be in conjunction with an initial franchise fee paid by new franchisees to enter into the franchise business. There is no one right way of calculating and paying franchise fees. This article will outline five of the common methods of calculating franchise fees in New Zealand.\u00a0<\/span><\/p>\n\n\n\n

1. Fixed Fee<\/span><\/h2>\n\n\n\n

A fixed or flat fee is a set amount of money that a franchisee must pay to you on a weekly or monthly basis. This amount is irrespective of the turnover or profit of the franchise. This amount, how to change it and whether it is possible, should be outlined as a clause in the franchise agreement.<\/span><\/p>\n\n\n\n

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This method of calculating franchise fees gives certainty to your income and provides the franchisee with the ability to plan for their financial commitments. <\/span><\/p>\n<\/div>\n\n\n\n

2. Percentage of Weekly or Monthly Turnover<\/span><\/h2>\n\n\n\n

An alternative method to calculating franchise fees is to set a percentage of the income, or gross revenue, of the franchise. The franchisee can pay this amount on a weekly or monthly basis. For example, 5% of the franchisee\u2019s gross revenue each month. The franchise agreement should specify this percentage. This method of franchise fees is also known as paying royalty fees. <\/span><\/p>\n\n\n\n

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This method is more beneficial to the franchisee than a fixed fee, as it will correlate to the franchise\u2019s earnings. If the business has been slow for a particular month, the franchisee will pay less in fees. Likewise, if the franchise is particularly successful one month, the franchisee will pay more. <\/span><\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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