Why does one have to pay franchise fee when they take up a new business? This is the most commonly asked question, any entrepreneur has, while they seek to purchase a franchise. Franchise Fee is the cost, that the franchisee has to bear, in anticipation of the returns that they expect, in lieu of the support, the training, and the commitment a franchiser gives to the franchisee, more fully described in the franchise agreement, franchise manuals and other documentation, for getting the rights to operate and earn from the franchisers business and their systems.
In simple words, it's the non-refundable component of the premium, that a business owner charges, justifying the return on investment for their business. There are several methods of calculation of the franchise fee and a more common approach is through a franchise fee calculator that evaluates several components of the franchisers business and arrives at a practical amount that changes as the franchise system evolves.