Royalties make the franchising world go round.
Royalties help pay for the corporate support structure designed to rally around your franchise and ensures all parties walk away profitable. Your royalty fees may be a flat fee, a percentage of gross revenue, or both, but in any case, handling the smooth transition of royalties to your franchisor is in the best interest of all parties.
Why Royalty Fees are A Good Thing
You’re probably not always thrilled to see a share of your hard work siphoned away from you, and that’s understandable. But royalty fees are not only good for your business, but the expedient transfer of funds from franchisee to franchisor can generate more revenue for everyone.
In much the same way your tax dollars fund the roads and highways you use to freely travel, your royalty fees pay for the complex infrastructure your franchise stands on.
Your supply source, if purchased through the franchisor, has already been vetted and sought out. Your branding was created by expert teams. National advertising campaigns directly benefit you and provide far more reach than any single store could realistically afford.
The franchisor also takes on a host of risks that, as a franchisee, you won’t have to worry about. Your personal capital won’t be at stake and your name is often not on the lease and employment agreements.
Plus, franchisors often supply hands-on training to ensure your local hires can assimilate to the brand and maintain the standard of quality expected of them. Franchisors are often highly experienced in expansion and will train your employees well.
In short, you get a lot of resources for your fees. That’s why timely payment of those fees only serves to further bond you to your franchisor and build social capital that can really come in handy.
Royalty Fee Calculations
Because royalties have to be accurately calculated (you don’t want to have an audit on your hands), franchisees and their managers spend hours tracking and calculating royalties for the franchisor. This important but necessary task often takes far longer than it needs to—adding thousands of dollars of avoidable cost in the form of labor.
This can negatively affect business in various ways when royalty percentages are inconveniently hand-calculated every single time. Additionally, franchisors may audit your specific storefront’s royalty report periodically even if there is no discrepancy in your books. This invasive and often time-consuming process, although necessary, is the last thing managers want to deal with.
You’ll need a system in place that can do this math for you—calculating the precise amount you owe, and automatically sending both the money and the reports to your head franchisor.
Automated Royalty Payments
Franchisors and franchisees alike can benefit from automated royalty payments through the Franpos system.
Here’s what we mean by automated: zero calculations, zero worries, and zero inaccurate royalty reports.
The Franpos POS system seamlessly calculates and sends your royalties for you, so you can solely focus on growing your business.
If you would like more information in our fully integrated POS systems, please book a free DEMO with us.