Franchising Financials – The Franchise Fee and Royalties

“How much is the Franchise Fee?” is often one of the first questions a prospective franchise owner asks. If you are looking to start your own franchise, one of the first things you are mostly likely thinking about is the cost. With this year’s ongoing pandemic, you should also be thinking about the stability of the franchise’s industry and how it is adapting to the new normal. Fortunately for 2nd Family, the senior home care industry has proven to be a stable business. Home care is an essential service and 2nd Family was able to continue care during the rough initial months of lock-downs and quarantine. 

What is a Franchise Fee?

A franchise fee is the amount of money paid directly to the franchisor for the use of their brand and proven operational systems. These fees range between industries but on average run between $20,000 to $70,000.2nd Family’s franchise fee is 45k. This is about average, or even on the lower side, for a home care service franchise. The franchise fee is usually put right back into the franchising program to better equip both franchisor and franchisee for success. It is a franchise myth that franchisors make most of their money from the franchise fee. Many franchises, 2nd Family being one of them, are always trying to improve and grow and franchise fees help them do that. Don’t mistake the franchise fee as the total initial investment cost though. The franchise fee does not include the added initial costs that will be needed to open and get your business up and running. 

Understanding Royalties

Royalties are collected on a monthly basis and are a certain percentage of your franchise’s monthly sales or in some cases, total profits. Like the franchise fee, royalty fees also range depending on the industry and business volume. Higher volume usually means lower royalties. Royalty fees are where franchisors make their profit. And for franchisors to make a profit, they must set up their franchisees for success because when their franchisee makes money, they make money. This is the motivation and why franchises have less risk than starting a business from scratch. A franchisor’s ultimate goal is to create a cycle of success for themselves and their franchisees. The cycle begins with setting franchisees up for success by providing hands-on training and open communication. A successful franchisee allows the franchisor to sell more franchises, which in turn allows for growth and innovation for the brand. And that brand growth will ultimately turn into more success for the franchisees. 

The Bottom Line

Knowing what you know now about franchise fees and royalties, you are in a better position to really start thinking about the initial investment to start your own 2nd Family franchise. As mentioned before, there is a 45k franchise fee with an additional $41,720 to $99,239 for marketing, licenses, permits, retail space, etc. Find the total breakdown on the Investment page of our website. If you have more questions about financing a franchise and what requirements there are for becoming a 2nd Family franchisee, call 1-800-987-0191 now or schedule a call to learn more. Remember, your success is our success!