According to Investopedia, business owners give operating licenses to third-party owners in the franchising industry. Most franchisors charge a franchise fee in exchange for operational business rights. This one-time fee refers to the initial investment fee and is usually governed by a federal law.
Africans can earn this fee from prospective franchisees at the start of their business relationship. According to Small Biz Trends, you can earn $25,000 to $50,000 from initial investment fees. However, the initial investment fee varies by franchise brand and industry segment. Most franchisors cover market costs, compensate salespeople, and more with this fee.
According to The Balance Small Business, franchise royalties are ongoing payments from the franchisee to the franchisor for continuous operations. Franchisors allow investors to use their branding and claim ongoing management service fees or royalties. The royalty fee represents five or six percent of gross sales or revenue.
Africans can earn royalties from business franchising and make even more when sales revenue increases. While the 6% average differs by industry, photo products and services have the lowest royalty at 4.9%. According to Small Biz Trends, you can earn 14% royalty from liberty tax services or 10% from business-related franchises.
According to the Balance Hub, investors renew contracts at the end of their franchise agreement. This process incurs administrative and legal costs with profits for franchisors. Investors can re-up the contract terms and renew the relationship with the franchisor at a fee. It is another way for Africans to make money from business franchising.
Most franchisors refer to the payment as a successor fee because it is lower than initial investments. While the payment is low compared to the initial franchise fee, it covers the administrative and legal costs.
Sublet Rent Upcharges
According to the Canadian Business Franchise, franchisors earn high profits from sublet rental charges. Many franchisors earn more income by leasing properties or subletting the premises to business franchisees. If you can get a property at a lower price, this franchising industry is for you.
With a strong negotiating power, African franchisors can earn a fortune in the franchising industry. You can secure a good deal with landlords and make money off investors. Furthermore, franchisors negotiate lower rents with building owners, sublet the space to their franchisees, and upcharge the rent.
Sell Event tickets
According to Franchise Gator, franchisors can earn an additional income by charging investors for event tickets. African franchisors can benefit by making event fees and attendance compulsory to franchisees. If you can organize product promotions or launch events, consider the business franchising industry.
You can earn a decent income from this profitable market. Many franchisors cover the organizing costs, but you can make a profit from it. Making the fee compulsory is an ideal strategy to make more money. Furthermore, investor payments can cover the cost of running the day.
Offer Training to Struggling Franchises
According to What Franchise, many franchisors include the initial training in the franchise payment. But they charge a fee for separate or additional staff training. In addition, the initial franchise payment covers the price of specialist equipment, territorial analysis, and recruitment. Site identification, training, and franchise launch are additional fees covered in the initial cost.
But if the franchisor omits the training fee, consider making further inquiries as investors may pay separately. African franchisors can offer investment packages training and earn a desirable income with training fees. Consider packages with different levels of coaching for more income.
Equipment and Supplies
According to Lusthaus Franchise Law, franchisors can determine products and services for franchisee’s business operations. As a result, franchisors ensure investors meet the required standard for quality assurance. This approach is an effective way for African franchisors to increase profit margins. In addition, it gives the franchisor bargaining power as they determine considerable discounts for investors.
Many franchisors make money from supplying equipment for regular business operations and attract more investors with the proceeds. The more investors in a franchising business, the larger the supplies for business operations.
Market your Brand
According to a report on LinkedIn, franchisors can become more successful by investing in marketing. African franchisors build brand awareness, attract investors and increase revenue with effective marketing campaigns. Consider marketing your business if you want to create positive brand associations and earn more in initial payments and royalties.
You can get your brand name in front of customers, letting them know the offered products and services for business growth. Consider multi-channel marketing and leverage social media for brand recognition.
African can earn a desirable income from business franchising through initial investments, royalties, or renewal fees. You can also make money by selling event tickets, sublet rent upcharges, and equipment sales. The business franchise industry is lucrative and earning an income is a step closer to living your dream life. Now it’s time to explore the industry and make a desirable income with effective strategies.
Olayinka Sodiq is a qualified writer with technical, analytical and copywriting experience gained from 5 years of both in-house and freelancing gigs. He is versed in finance, investments, technology, blockchain, mergers & acquisitions, bankruptcy, etc.
*The views expressed in this article are the views of a contributor at Business Insider Africa. It does not represent the views of the organisation Business Insider Africa.