As you are looking at the possibility of investing in a franchise, you’ll want to know what the fees are with buying and running the business. These fees are disclosed in the Franchise Disclosure Document, under Items 5 and 6, Initial and Other Fees, respectively.

Under Item 5 are listed the initial fees for buying a franchise. There will be listed single unit franchise/license fees, as well as the fees for signing on for multiple units. There, in most cases, are multi-unit discounts to the fees, but that depends on the franchise. Area and Master Developer fees are also listed here, as well as any discounts offered by the franchisor, such as VetFran discounts.

Other initial fees listed under Item 5 could include, but are not limited to:

Supplemental Services Fees

Grand Opening Fees

POS Software Fees

Under Item 6 are listed Other Fees associated with operating the franchise and the top-listed fee usually is the royalty. This is a regular payment made to the franchisor based off either a percentage of sales (either net or gross) or a flat fee. When looking at similar franchises in the same industry, comparing how the royalty payments are structured is crucial. A value of 1% can make a huge difference over the long haul.

In addition to royalties, the other fees include, but are not limited to:

Advertising Fees

Training Fees

Local Advertising Co-op Fees

Computer/Software Fees

Renewal Fees

Audit Fees

Transfer Fees

Interest

Late Fees

Insurance

When you are completing your P&L projections, you’ll need to have a firm handle on the initial and ongoing fees of running a franchise. The FDD provides those details. To obtain an FDD from a franchise, you can contact them directly or use the assistance of a franchise consultant.