When putting together your plan to build a successful franchising program, review all possible sources of revenue. Of the most time tested successful franchising keys, revenue is a top priority.
You must generate sufficient income to service your Franchisee, sell more franchises and generate the desired profits in order to become a successful franchising company.
Successful Franchising Keys, Generating Revenues
There are a number of ways a successful franchising company can generate revenues. The first is the initial franchise fee.
For a successful franchising program, the initial franchise fee is typically 25 to 40% profit. That is after deducting the costs of selling the individual franchise, furnishing initial training and meeting the Franchisor’s other pre-opening obligations.
Other successful franchising keys? There are several factors to consider when establishing the initial franchise fee. These factors include the amount charged by competitors, the Franchisee’s costs to open the business, the Franchisor’s anticipated expenses to sell and launch the location, the franchise’s profit potential and possibly other issues.
In many successful franchising programs, the owners of the Franchisor frequently fill the roles of franchise sales, initial training and Franchisee service for the first few years. Therefore, these costs are minimal until the successful franchising company becomes established.
For successful franchising programs, the second and typically most significant revenue stream is the continuing royalty or service fee. This fee is either a flat amount assessed on a weekly or monthly basis or a percentage of the franchise’s sales.
In successful franchising programs, the royalty or service fee generates sufficient money to fund the Franchisor’s on-going services to Franchisees, grow the franchise company and produce a substantial profit.
Depending upon the specific business, there may be additional income streams for successful franchising companies. These sources may include the sales to Franchisees of products, services or equipment, providing financing to open the franchise location or offering site development arrangements to Franchisees.
A particularly lucrative area (one of the more successful franchising keys) for many successful franchising companies is the on-going sale to Franchisees of specialized Franchisor goods and/or services. With many successful franchising service companies, the Franchisor earns substantial fees by actually providing the services the Franchisees market.
There are numerous successful franchising companies that are built around a proprietary product that the Franchisor sells to its Franchisees for example, Baskin-Robbins’ 31 Flavors or KFC’s 11 herbs and spices.
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