What are the costs associated with franchising versus licensing?

What are the costs associated with franchising versus licensing?

Franchising typically involves initial franchise fees, ongoing royalties, and marketing contributions. Licensing usually has lower upfront costs but may include royalties based on sales.

Can you break down the initial fees for both options?

Sure! Franchise fees can range from a few thousand to over a hundred thousand dollars, while licensing fees are often lower, sometimes just a few hundred to a few thousand.

What about ongoing costs?

For franchises, ongoing costs often include royalties, which can be 4-8% of sales, plus marketing fees. Licensing might have lower ongoing costs, usually 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 risky.