What Is a Franchise Fee?

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A franchise fee is the amount of money a person, organization or company pays to the franchise holder to support the knowledge of the system. Find out how franchise fees provide opportunities to buy into this system with help from a management teacher in this free video on business management and franchises.

Part of the Video Series: Business Management
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Video Transcript

Hi, my name is Mark and we're going to talk about franchise fees. Franchise fee is an amount of money a person, an organization, a company pays to the franchise holder. This is a...basically the money it costs to have to support the knowledge of the system. A franchise is an...is basically a business practice where an entrepreneur buy into the know-how of an existing successful organization. They're buying the name and the know-how -- the system. So a franchise fee is actually giving you the opportunity to buy into that system -- into that service. And with that, you get the tools, the know-how, the support, the administrational backup in which to operate that service. So that fee effectively buys you all of those facilities. Depending on the business you go into will obviously determine the prices involved. If you're going to buy into a very, very well-known established organization, then it might be more expensive. And again, it might depend on the business itself, whether it be a cafe, whether it be a printing business, or a...or a courier service. It all depends on the type and the size of the business. So the fee will be reflecting that. But the purpose of the fee and the whole reason for entering into a franchise is that you are buying into the know-how, the key to success that operates, hopefully, on a global basis. Good luck.

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