What's a Franchise Fee? Understanding Franchise Costs & Investments

As you analyze various franchise opportunities, you’ll likely see information regarding the requirement to pay fees. And while it may seem unfair that you’ll have to pay ongoing fees to remain in business as a franchisee, these payments fund your franchisor’s initiatives – which directly helps your location. Knowledge of the fees you will pay throughout the life of your business will go a long way toward providing you with a financial roadmap. The fee structure can be complex and confusing. We explain the different fees and what you should expect in return for your investments.

What Are Franchise Fees?

Franchise fees are payments the franchisor requires their franchise investors to pay as part of their franchise agreement. These are typically a percentage of the franchise location’s monthly gross sales. However, some franchises may use a sliding scale where those who bring in more revenue pay a higher percentage than locations who make less. Other systems may just do a fixed dollar amount. You’ll want to carefully review the Franchise Disclosure Document (FDD) to understand the franchisor’s fee structure.

There are multiple types of fees and they all serve different purposes. As a franchisee, you’ll likely have to pay an initial franchise fee, royalty fees, ad royalty fees, and possibly a technology fee. Royalty and ad royalty fees are recurring charges, but you’ll only need to pay the initial franchise fee once – unless you choose to open another location.

Types of Fees

Franchisees also receive marketing services, training, and support in exchange for the fees they pay. We break down what each fee helps the franchisor do.

• Initial franchise fees: A lump sum that’s usually collected when the franchise is purchased. The fee allows the franchisee to license their brand and access the organization’s practices as well as protected intellectual properties. These fees can range from $25,000 to $50,000 on average but can vary according to location, size of company and franchise.
• Royalty fees: Franchisees pay royalty fees in exchange for the ongoing right to be a franchise owner. Royalties help the franchisor cover the costs of running the system. All of the operational support and training franchisees receive is funded by royalty fees.
• Ad royalty fees: These fees are paid to fund the franchisor’s marketing strategy and campaign implementation on the local and national levels to increase brand awareness. Reputable franchisors should also use these funds to create any marketing collateral like social media creative, in-store posters, and more for locations to use individually.
• Technology fees: Select franchises require payment of a technology fee, which contributes to the purchase or licensing of software, hardware, and networking equipment. This is typically a flat rate and not one calculated based on percentage of revenue.

Franchise with Two Maids

Two Maids was founded in 2003 and has grown to be a leader in the residential cleaning industry, which is expected to reach a value of $47 billion by 2026. Part of the growing demand for residential cleaning services is due to more households having multiple incomes and the growing work from home trend. The market is primed for investment and now is a great time to make the jump.

We support our franchisees every step of the way. From your grand opening event to ongoing support through the life of your agreement, we use our decades of experience in the industry to develop systems and practices that set you up for success.

Two Maids is a low-cost cleaning franchise, with minimum startup costs of $83,140. Our franchise opportunity is affordable for any new or seasoned entrepreneur. 2021 was a great year for our system. Our franchisees saw an average gross margin of $571,377* and an average revenue of $1,097,830*. Given our affordable investment costs, our franchise partners have plenty of opportunity to capitalize on their investment with Two Maids.

To learn more about our franchise opportunity, request information, and one of our franchise advisors will be in touch to discuss franchising with Two Maids.