Step Ten - Check What You’re Paying For

Before you sign the agreement and write the cheque, make absolutely certain you know what the up-front franchise fee covers. It is likely to include at least the right to trade under the franchise’s name, the right to use the franchise system, initial training and all system manuals. It may also include a (possibly exclusive) territory. Note that these rights will only apply for the term of the agreement – often five or ten years – and may include a right of renewal. The term may be less, particularly where lease premises are involved.

If you change your mind or if you fail training, you may still be able to pull out within a certain ‘cooling-off’ period but the franchisor will probably be entitled to subtract their own costs before returning your money.

You must also ensure you have a clear understanding in writing of any ongoing fees which are payable. These may include a royalty or management fee, marketing or advertising contributions, ongoing training fees, accounting fees and others. It is important that you are aware of what fees are payable, how they are calculated and what they are for.

Essential reading
What do you get for your franchise fees?