November 24, 2020
When you own an independent business, you can certainly expect to come across unforeseen expenses. Without the help of a financial advisor or someone that has owned a business in the industry, it’s incredibly difficult to predict what expenditures you’ll face. Franchising has made it much easier for you to set expectations and invest within your means. For instance, if you’re thinking about opening a commercial cleaning franchise with Image One, you won’t need to worry about missing any initial costs because we give you all of the information about your investment beforehand.
One of the most important ways we do that is through our Franchise Disclosure Document or FDD. Once you show interest in opening a commercial cleaning franchise, we will send you over this legal document that clearly outlines all of your initial and ongoing costs. One of those recurring costs you can expect to fulfill with any franchise venture is the royalty fee, which, in our case, is a percentage of your monthly revenue that is paid directly to the franchisor.
Let’s look into a few of the reasons why franchisors request this fee and how it is calculated.
Why do franchise businesses charge a royalty fee?
For every expected cost and price point that you fulfill as a franchisee, you will ultimately reap benefits. For example, after signing your franchise agreement and submitting your fee to your franchisor, you will be allowed access to the Image One brand and business model, which will also include our proprietary software.
Recurring royalties are typically used to settle the ongoing expenses such as updates to operation manuals, field support, administrative costs, staff salaries, new franchisee recruitment, product research/development, and support brand expansion. Image One makes opening a commercial cleaning franchise easy — for that fee, we can continue to assist with the growth of your brand and improve on your offerings for years to come.
How is it calculated?
Every franchisor has its own established royalty fee, but the percentage may differ depending on the brand. Image One franchise operators can expect to commit 10% of their monthly revenue to the fulfillment of this cost. For other franchise brands, there are four main ways to determine that cost:
- Fixed fees: set amounts paid to the franchisor on a weekly or monthly basis, regardless of the sales made by each territory
- Percentage of gross revenue: the percentage of revenue that is accrued over a period of time, typically on a monthly or weekly basis
- Percentage per transaction or item sold: the total percentage of revenue made from the services or product that is calculated on a point-of-sale system
- Split profits: a set agreement of shared profits portioned between the franchisee and franchisor
When it comes to the franchise investment, we do realize that making the best decision for you is incredibly important. The Franchise Disclosure Document (FDD) is an essential resource for you to learn more about financial expectations if you’d like to learn more about the investment.
Opening a commercial cleaning franchise with Image One can be an incredibly fulfilling way to open a commercial cleaning franchise. If you’d like to learn more or you’d like to receive a copy of our FDD, contact us today.