If You Don’t ‘Want’ To Pay Royalty Fees, Don’t Buy A Franchise

Royalty fees…paying them, is part of what you sign up for when you become a franchise owner.

But if you have a problem with paying royalties-before you’re even a franchisee, that’s not good. And that’s what this post is about.

How Are Royalty Fees Determined?

The franchisor decides how much royalties are. And in most cases, they’re a percentage of revenue. A % of your sales.

For example, let’s say your franchise business did $32,000 in revenue last month.

And the franchise agreement you signed when you purchased your franchise business stated that the royalty percentage is 6%.

So based on your business doing $32,000 worth of business, you’d owe franchise headquarters $1920, which is 6% of your sales.

Got it?

And maybe that’s why you don’t want to pay royalties.

Those thousands of dollars going to the franchisor.

“That’s A Lot Of Money!”

It sure is. Especially if you look at how much you’d be sending headquarters in royalty fees on an annual basis. Here’s the math:

$32,000 in monthly revenue X 12 months = $384,000.

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And 6% of that figure comes out to $23,040 in royalty fees, annually.

Note: Some year’s, your franchise business may do $500k in revenue, while some years you may only do $300k in revenue. But the math is the same.

Bottom line:

$23,040 is a lot of money.

Unless you feel you’re getting a good value from being a franchisee.

“I Don’t Want To Pay Royalty Fees”

Then don’t. Start a business on your own instead.

I mean it.

I’m not trying to be a jerk here, but if you want to “be the boss,” you have 3 choices.

1. Start your own business.

That means coming up with an idea for a product or service and inventing everything your business does. But you won’t pay royalties. 

2. Buy an established independent business.

The good news in this scenario is that there may already be revenue coming in, and most of what you need to know about running that business will be taught to you. And again, you’re not going to pay out any royalties.

3. Buy a franchise.

In this case, you’ll be purchasing a proven business type, with systems, marketing, and many other things that are instantly in place for you. You follow their plan and get their support. And for those things, you pay out a percentage of what you take in. In royalty fees.  

Wait. Here’s another way to get into business for yourself without paying royalty fees. 

Choices. Decisions. Royalty Fees

So what are you going to do?

What type of business do you want to own and operate?

What will work best for you?

So many choices.

So many decisions.

And since we live in a free country, you’re free to make your own choice.

Are you willing to pay franchise headquarters a small percentage of your sales so you can be your own boss in a business the franchisor invented?