What are the costs associated with franchising compared to licensing?

What are the costs associated with franchising compared to licensing?

Franchising typically involves initial franchise fees, ongoing royalties, and marketing contributions, while licensing usually requires a one-time fee and possibly royalties on sales.

Can you break down the initial costs for both options?

Sure! For franchising, initial costs can range from $10,000 to $50,000 or more, depending on the brand. Licensing fees are often lower, usually between $1,000 and $10,000.

What about ongoing costs?

Ongoing costs for franchising include royalties, which can be 5-10% of sales, and marketing fees. Licensing may have lower ongoing costs, often just a percentage of sales.

Which option is generally more profitable?

It depends on the business model and market. Franchises can offer more support and brand recognition, while licensing can be more flexible and less costly.