Franchise Fees
Some franchisors charge a deposit that may be fully or partially non-refundable. Often the deposit is used to research the territory or to help you find a suitable property. If you can’t find a property within an agreed period the deposit is usually refundable less the franchisor’s reasonable costs. In other circumstance, unless the deposit is for a nominal sum, or the franchisee gets something for their money, such as a specific territory reserved for them, the deposit should be refundable. Franchisees must make sure that before they part with a deposit they receive a written confirmation from the franchisor that:
1. if the franchisee goes ahead and signs a franchise agreement, the amount of the deposit will be credited towards the payment of the initial franchise fee; and
2. the precise circumstances under which it is non-refundable/refundable with the appropriate time limits.
Initial Fees
The initial fee varies from company to company and is paid by the franchisee when the franchise is granted. The initial franchise fee covers the cost of training, recruiting, territory analysis, site identification, specialist equipment, stationary, franchisee launch, etc. In addition, there will be an element of recovery of franchise development costs by the franchisor. read on
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