Knowledge Base

How long do you have to pay management fees for?

Costs
Written by
Sam Stawarz
Published on
June 12, 2023

A management fee is a payment made to a franchisor for the use of its brands, trademarks and other intellectual property. Management fees are typically paid by franchisees on an ongoing basis, although sometimes the terms of the agreement between franchisor and franchisee will allow for one-time payments only.

If you don't pay your franchise fee, you lose your franchise rights.

If you don't pay your franchise fee, you lose your franchise rights.

The franchisor is entitled to a franchise fee from every franchisee--it's non-refundable and paid up front. The amount varies from one franchise system to another, but it's typically between $10,000 and $25,000 per unit (with some exceptions). If you don't pay this money when required by your contract or agreement with the franchisor, then they can sue you for breach of contract; if successful in court and awarded damages by a judge or jury who agrees with their case against you based on its merits (which might include showing evidence like invoices), then those damages would include having been deprived their rightful share of profits generated through selling services provided through using YOUR NAME/BRANDING!!

A management fee is not a royalty.

A management fee is not a royalty. A management fee is a one-time payment that you pay to your franchisor, who then uses it for expenses such as marketing and training. The cost of running your business is not included in your franchise agreement and will be covered by you directly.

Royalties are ongoing payments made by franchisees to their franchisor based on their sales volume or gross revenue (some companies use both). Royalties may be paid monthly, quarterly or annually depending on the terms of each contract--but they're always required if you want to keep using the brand name and logo associated with that company's products or services.

If you stop paying your territory will be shut down.

If you stop paying, your territory maybe shut down or possibly sold off to someone else.

Your franchise agreement states that you must pay the management fee on time and in full every month. If you don't do this, then your territory could be taken away from you. However, once the franchisor has received their money from you for any arrears, they are unlikely to force closure over unpaid fees.

So as long as there is still value in having access to customers in an area where other businesses have failed before them -- which can happen if there aren't many competitors nearby -- then paying off old debts will not cause any problems for either party involved!

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