a few times. However, a franchisor has a great deal of experience accumulated from helping its franchisees with start up. This experience will help reduce mistakes that are costly in both money and time. Assistance is usually offered once the initial start up is completed. For instance, a franchisor will provide management assistance, such as accounting procedures, personnel management, facility management, etc. Marketing assistance is typically offered as well. A franchisor can prepare and pay for the development of professional advertising campaigns. Regional or national marketing done by the franchisor benefits all franchisees.(7) In addition, the franchisor can provide advice about how to develop effective marketing programs for a local area. This benefit usually has a cost because many franchisors require franchisees to contribute a percentage of their gross income to a co-operative marketing fund. The benefits of purchasing a franchise explain why more than 50,000 franchise opportunities exist in the United States. However, this compares to almost 14 million independent businesses.(8) There are obviously reasons why not everyone chooses the franchise option. One major drawback to starting a franchise is the initial franchise fee. This can range from a few thousand to several hundred thousand dollars. There are two critical matters that affect your decision about buying a franchise. These are whether you can afford the franchise fee and if you can expect a reasonable return on investment. Franchisors also will typically require a franchise to pay continuous royalty fees. The fees are a percentage of the gross income from the business. Usually the royalty fee is less than ten percent.(9) Some franchisees begin to resent the royalty fees after several years because they have developed experience and built a strong customer base. This success often results in a feeling that the business could continue without the assistance of the fra...
