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Mr. Franchise On Pricing A Franchise: Franchise Fees & Royalties - Mr. Franchise Weighs In

Discuss anything to do with property law - buying, selling property

Mr. Franchise On Pricing A Franchise: Franchise Fees & Royalties - Mr. Franchise Weighs In

Postby Kynlas » Tue Aug 02, 2016 5:15 am

Mr. Murphy:

I'm thinking about creating a franchise company for a medical imaging procedure, but don't know how to set pricing.  Our franchiser will set quality standards and provide training and oversight of the procedure.  We will also provide DTC marketing and market to referring physicians.

Are there rules of thumb to determine initiation and unit pricing?

Thanks.
Kynlas
 
Posts: 47
Joined: Wed Apr 02, 2014 10:06 pm

Mr. Franchise On Pricing A Franchise: Franchise Fees & Royalties - Mr. Franchise Weighs In

Postby weiford » Tue Aug 02, 2016 8:42 am

Franchise Foundations has a free franchise legal help advice hotline where you can discuss your situation with a franchise attorney. Go to:http://www.franchisefoundations.com/franchiseattorney.html

Going to the specifics of your question, there are no general rules of thumb or set formulas to determine the initial, one-time franchise fee or ongoing royalty payments. Typically, initial franchise fees range from $15,000 to $50,000(McDonalds charges a $45,000 franchise fee, for example). Ongoing franchise royalty payments range from 2% to 10% on gross sales. In a service business, higher royalty fees are possible because higher profit margins generally allow this. Another tip is to examine the McDonalds franchise program and see how they structure their franchise relationship. Although they're in a different industry, they are still the world's best and most recognized franchise. The Franchise Foundations website has a page dedicated to the McDonalds franchise program, where you can also obtain the 375-page McDonalds FDD at:http://www.franchisefoundations.com/mcdonaldsfranchise.html

When I do franchise financial planning for clients, I develop a series of proformas based on different assumptions and scenarios with the goal of structuring a franchise relationship that’s a win-win for both sides. There’s a lot of creativity and thinking outside the box if you do it properly, but the long-term results are definitely worth the effort. I didn’t understand your reference to “unit pricing.” Did you mean selling an existing business as a franchise?

You also mentioned a franchise training program. Don't forget another integral part of the franchise process - drafting a franchise operations manual. Often, this task is mistakenly delegated to an outside franchise consultant. Paying someone $20,000 or more, who knows absolutely nothing about the in's and out's of operating the business makes no sense. There's a very good article on our website with tips and a strategy on how to write your own franchise operations manual in three easy steps:http://www.franchisefoundations.com/operationsmanuals.html

Finally, you should use an appropriate budget for franchise development that includes assistance(planning and editing) with your franchise operations manual, helping develop the training program curriculum, strategic franchise planning, drafting the legal documents(FDD, franchise agreement, etc.) as well as franchise registrations in various franchise registration states. There's another excellent article on the Franchise Foundations website about developing an appropriate and cost-effective franchise development budget:http://www.franchisefoundations.com/franchiseabusiness.html#Bookmark2

Any other questions, etc., feel free to contact me though the Franchise Foundations website using the franchise attorney link below.

Kevin B. Murphy, B.S., M.B.A., J.D.

Mr. Franchise

Franchise Foundationshttp://www.franchisefoundations.com/franchiseattorney.htmlhttp://www.franchisefoundations.com/franchiseexpert.html
weiford
 
Posts: 48
Joined: Thu Mar 31, 2011 11:50 am

Mr. Franchise On Pricing A Franchise: Franchise Fees & Royalties - Mr. Franchise Weighs In

Postby Levey » Wed Aug 03, 2016 7:32 pm

Mr. Murphy:

I'm thinking about creating a franchise company for a medical imaging procedure, but don't know how to set pricing.  Our franchiser will set quality standards and provide training and oversight of the procedure.  We will also provide DTC marketing and market to referring physicians.

Are there rules of thumb to determine initiation and unit pricing?

Thanks.
Levey
 
Posts: 43
Joined: Wed Jan 29, 2014 1:23 am


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