Interpretation Of Franchisees' Payment To Headquarters

The initial franchise costs include headquarters recruitment, assessment, training, search for addresses and all the other costs. In some cases, it also includes concessionary fees increased as the franchise system matures and goodwill increases.

How to determine the level of initial franchise costs, some people think that we should reduce the initial cost as far as possible so that the start-up cost of the franchisee can be minimized; others think it should be set higher because the initial cost is an important source of revenue for headquarters, so that headquarters can get large cash income and profits immediately and solve the problems faced by the business operation.

In fact, franchises, like other businesses, need to go through a certain period of development before they can start to make profits. This period is about 3-5 years. The headquarters must prepare enough funds to maintain the business before the profit. Therefore, it is unrealistic to solve the difficulties of headquarters funds in the short term through joining the fund.

Under normal circumstances, the initial franchise costs accounted for 5% to 10% of the total investment of franchisees. For example, if the investment of a franchised store is 500 thousand -60 yuan, the initial franchise fee will be between 25 thousand and 60 thousand yuan. Of course, for those special headquarters with high prestige and higher profits, the cost may be higher than 5% to 10%.

Subsequent affiliate fees are paid by the franchisee after a certain period of time. Some are paid monthly and some are paid annually. It includes the management service fees and advertising expenses of the headquarters to the franchisees. The percentage is usually collected according to the percentage of the recipient, and some fixed fees are determined.

Although it is possible to maintain fixed income in order to maintain headquarter's revenue level, there are still many drawbacks in this way if the inflation factor and future development are taken into account. The franchisees are reluctant to accept it because they are not sure about their future business performance and worry that the profit will be less than the franchise cost.

It is easier for both sides to accept a percentage based on the percentage of income. The franchisees know exactly how much money they should pay and how to calculate the amount. They are paid on the basis of income and have no worries. Besides, the revenue of headquarters is directly linked to the performance of franchisees, so they will spare no effort to give full support, and headquarters can also profit from the business development of franchisees and avoid the influence of inflation.

It is also known as the first concession fee, which is the one-time fee paid to the headquarters by the franchisees when they join. It includes the right of the franchisee to use the trademark, special technology and other expenses developed by the headquarters, which reflects the joining of the franchisee.

The value of all the benefits gained.

The cost varies from headquarters to headquarters. For example, Japan's "7 - 11" company is 3 million yen, the "Seicomart" company is 2 million 500 thousand yen; the "Jye" company is 1 million 500 thousand yen; the "family market" company has only 500 thousand yen.

As a guarantee for future expenses and debts, it also has the prepayment nature of the goods provided by the headquarters to the franchisees. The number of the companies is different, such as the "Seicomart" company and the "family market" company, which are 2 million 500 thousand yen; and the "jiso" company is 750 thousand yen.

Whether the contract is refunded or not will vary according to the contract between the two parties.

3. royalty.

It is a fee charged by the headquarters for the management of the franchisee, and is paid by the franchisee on time.

The calculation method of royalty varies according to the industry, such as convenience stores are generally 30% to 50% of gross profit, fast food restaurants generally sell 5% to 10% of sales, rental industry is 6% to 8% of rental income, and the pubs are charged by the shop area, and there are also fixed packet fees.

4. liquidated damages.

If violation of the obligations and prohibitions stipulated in the contract is made, the liquidated damages shall be paid to the injured party as compensation in accordance with the contract stipulations.

5. other expenses.

Such as store design and construction costs, training fees, advertising expenses, equipment leasing, financial business fees, accident insurance fees, etc.

The main reference is whether the franchisee's profitability is reasonable, and how much profit a franchisee can earn in one year is the most important factor.

Because different industries have different risks, different headquarters also have different franchise risks. In this case, we can only use one of the most common risk levels to analyze.

In Hongkong, the total investment in a franchised store is about 550 thousand ~60 Hong Kong dollars. In China, the total investment volume of a franchised store is around 500 thousand yuan. Of course, it only includes the initial affiliate fee and the subsequent franchise fee.

How to judge the cost is reasonable? If the current economic situation in China, the return rate of investment in the retail industry is around 30% is more reasonable, so that we can calculate the reasonable return of the annual return, and then calculate the profits.

The formula is as follows:

Total investment x30%= annual investment return = annual expected profit + franchise fee

That is: franchise fee = total investment x30% - annual expected profit.

According to the above formula, we can calculate the reasonable franchise cost on different profit levels in different profit levels. Similarly, we can calculate the profit level investors expect based on the determination of franchise fees.