How long does it take to recoup the franchise fee?

A franchisee will usually be expected to pay a one-off initial fee that is usually payable on or before signing the franchise agreement. They will also be expected to pay an ongoing fee, often called the ‘management services fee’, which is usually based on a percentage of the franchisee’s annual turnover. However, when considering how long it takes to recoup a franchisee fee a potential franchisee should also give some thought to any additional upfront costs, for example, the acquisition of premises, shopfitting and staff, that may not be included in the initial or ongoing franchise fee.  As well as allowing for some basic drawings from the turnover for the franchisee’s living expenses, paying interest on any loans and paying all other running costs of the business, the franchisee will need to calculate how soon the anticipated rise in turnover will allow repayment of these costs. To assist with this calculation the franchisee should consider taking independent accountancy advice. An independent accountant should be able to take an objective look at the forecasts of both the turnover and the expenses and reach a view as to their accuracy. With this information you should be able to make a reasonable estimate of how long it will take to recoup your initial costs.