The franchise fee—it’s been around basically as long as franchising itself has and hasn’t really changed much over the past decade. For many, it is the initial income made off of a deal. For brokers, it is their lifeblood. The franchise fee can be discounted or even waived completely for certain groups of people, which is typically reserved for people with a military, police or fire fighting background.
So if everyone has one, and we all know what it’s there for, what’s the big deal? Well, my astute franchising peers, the franchise fee could be the only reason a solid candidate decided to walk away. Unfortunately, for many young or emerging brands, the franchise fee becomes a barrier and can deter candidates from inquiring within a system that isn’t yet proven.
Enter Mosquito Joe, a brand that has been able to grow quickly in large part to the way they market their opportunity and use their franchise fee. I had a chance to speak with Mosquito Joe CEO, Kevin Wilson, about their approach to the franchise fee.
1851: What is the Mosquito Joe franchise fee? Why is it priced where it is?
Kevin Wilson: When we started pushing franchising efforts with Mosquito Joe, the franchise fee was $7,500. We wanted to incentivize people looking at our franchise opportunity so we started with a relatively low up-front cost.
Over the past three years, we have gradually raised our franchise fee to $20,000 which allows us to offer greater support and continue to build on our momentum. In the next few months, we will be increasing our franchise fee to $25,000.
1851: Why is it important to be able to market your franchise fee?
KW: I think, historically, you have a number of franchisors who become dependent of the upfront, onetime payment that the franchise fee offers. We've never taken that position and feel strongly about not relying on the fee for stability.
If you take franchisees on that onetime fee you potentially make bad decisions. If you can show that your franchise fee has value to potential franchisees you have a powerful tool to leverage. We primarily use our fee for support and our franchisees can see that from the people on the corporate level we’ve invested in and what we invest back into their markets directly.
1851: What is your opinion on discounts for franchise fees?
KW: I think discounts are a good thing to do for military and other people in service. They do a lot for our country and it's a great thing to be able to give back to them. If you're going to get more value where your fee is set right now there’s no real need to offer additional discounts. Sometimes it can be seen as a point of weakness or cheapen the brand.
1851: Do you think the franchise fee or how it is perceived will change in the future?
KW: It will always be how it is now for a couple different reasons. For one, franchisors use business brokers and the way they structure most contracts is that the broker gets the whole franchise fee or a large portion of this. Some franchisors are 100 percent reliant on brokers which can be a tricky situation to get stuck in. Another reason is that there is a lot of time, work and effort that goes into getting a franchisee up and running prior to receiving any revenue through royalties.