What is the meaning / definition of Franchise Fee in the hospitality industry?
The Franchise Fee or cost is an initial payment that a franchisee makes towards his franchisor in order to join the franchise.
Only when the Franchise Fee has been paid in full, the franchisee may begin operations as a franchise, and the franchise agreement is officially valid. Besides the initial Franchise Fee, franchisors are also often required to pay royalty fees which are regular monthly payments. These payments are typically a percentage of either the franchisee’s gross or net revenue. Overall, Franchise Fees vary greatly depending on the business and the applicable franchisor.