Are Franchise Fees an Investment or a Tax? The Real Measure of Support
By Joe Caruso
Franchise systems charge royalties and marketing fees as part of their business model. These fees vary widely depending on the brand, industry, and level of support promised. However, the real question isn’t whether franchisors are providing enough support. It is whether that support is actually making franchisees more successful.
A franchisor can list all the training, marketing, and operational resources they provide, but if those initiatives don’t translate into higher revenue and stronger profitability, then franchisees aren’t receiving value. Instead, they are simply paying another expense.
The Illusion of Support: Why Weekly Calls Don’t Matter
Some franchisors believe that holding weekly calls demonstrates their commitment to supporting franchisees. However, without clear key performance indicators (KPIs), action plans, and accountability, these calls often become routine check-ins with little impact. Frequency does not equal effectiveness. Furthermore, why would weekly calls matter when business conditions do not change dramatically within such a short timeframe?
Instead of asking, “Are we delivering more value than expected?” franchisors should be asking:
Support should be outcome-driven, not just a box to check. Franchisees do not need more meetings. They need high-impact actions that drive measurable success.
The Real Test: Do Franchisees See Fees as an Investment or a Tax?
Regardless of the percentage or dollar amount, the true measure of a franchise system’s value is whether franchisees perceive these fees as an investment in their success or simply another cost deducted from their bottom line.
A well-run franchise system should make franchise owners more profitable than they would be on their own. If franchisees feel they are receiving a strong return on investment, they will willingly pay the fees. If they do not, they will begin questioning why they are part of the system at all.
This raises two critical questions:
If a franchisor cannot answer these questions with data and real success stories, then all the “support” in the world will not matter.
What has been your experience? Have franchise fees driven real results in your business, or do they feel like just another expense? Let’s discuss.
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At Franchise-Info Advisory Partners, we know that franchising success isn’t just about having a great concept. It is about execution. The difference between thriving franchise systems and those that struggle often comes down to how well the business is structured, scaled, and supported.
Alongside Ned Lyerly and Michael (Mike) Webster PhD , we bring decades of real-world franchisor leadership to the table. Our expertise spans franchise recruitment, operations, and sales strategy, helping brands grow efficiently while avoiding the common pitfalls that derail expansion.
Franchise Info partners with Anders Hall , founder of Chainformation , to help franchisors implement cloud-based operations manuals and a unified communications platform. Chainformation’s core platform ensures that every franchise employee receives real-time access to essential training, brand standards, and operational updates, all directly on their mobile device. This technology automates and streamlines franchise operations, keeping multi-location teams engaged, compliant, and well-supported.
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Charismatic small biz owner & multi-brand franchisee.
1 周Well a tax suggests some basic infrastructure as a return. I think that needs to be there is a franchise system for sure. An investment suggests a more lucrative return which better be there for sure or you won't have a system to provide infrastructure to. I think it's less "this or that" and more a good ratio of both. Running a great system is difficult and you've pointed out a great reason why. I've been asked plenty to help them "turn my biz into a franchise." There seem to be plenty who think it's just a gold mine waiting for them to take advantage. It takes a combination of good zees and zors in any system to succeed but I agree with your post for sure. A certain amount of cheerleading is good to keep the culture and energy up, but without KPIs or at least something the operators feel like is actionable then you're not actually providing a ton of value for growth.
Elite Franchisor Leadership Coach + Former Franchisor CEO ?? Transforming Franchise Systems ?? Strategic Growth Expert ?? MBA
1 周Absolutly!
Elite Franchisor Leadership Coach + Former Franchisor CEO ?? Transforming Franchise Systems ?? Strategic Growth Expert ?? MBA
1 周Part 5 Beyond Transactions: Building Strategic Partnerships This vision of value creation isn’t easy—it demands commitment from everyone, from the CEO and executive team to the frontline coaches and field supervisors. Franchise leaders—including franchisees themselves—must embrace full accountability for their results and recognize their responsibility to develop other leaders. This is how the strongest organizations cultivate the unity and shared spirit that define world-class franchise networks. Franchise Fees Aren’t a Tax—They’re an Investment in Leadership Franchise fees aren’t a tax—unless the franchisor limits their role to transactional business support. When franchisors step up as leaders, they transform the relationship from a simple business agreement into a strategic partnership, fostering leadership at every level and driving meaningful, sustainable growth. In the end, the real question isn’t about the cost of franchise fees—it’s about the value of leadership that franchisors bring to their networks. When leadership flourishes, the returns—both economic and human—are limitless. Voilà! Ciao for now! Any input to enhance the conversation?
Elite Franchisor Leadership Coach + Former Franchisor CEO ?? Transforming Franchise Systems ?? Strategic Growth Expert ?? MBA
1 周Part 4 2. Leadership: The Hidden Catalyst for True Value Creation The real, transformative value—the kind that never feels like a tax—comes from the franchisor’s ability to develop leadership within their franchisees. It’s not just about business growth; it’s about empowering franchisees to become true leaders—leaders who drive local expansion and foster a growth mindset that fuels creativity, resilience, and long-term success. This is where the timeless adage “Think global, act local” shines. A franchisee should feel the value of their relationship with the franchisor every single day—not just through financial statements, promotions, or technological systems but through a genuine sense of belonging, engagement, and shared purpose. True leadership means being present during both the highs and lows, cultivating a partnership where the franchisee feels supported, respected, and inspired to contribute to the brand’s collective success.
Elite Franchisor Leadership Coach + Former Franchisor CEO ?? Transforming Franchise Systems ?? Strategic Growth Expert ?? MBA
1 周Part 3 This economic dimension includes essential franchise pillars—supply chain management, marketing innovation, brand protection, and performance audits. Yet, too often, franchisees perceive franchise fees as a mere tax rather than an investment that fuels their growth. Why does this happen? Because franchisors sometimes lose sight of their primary mission: to create value that extends beyond financial results and touches on human development. In reality, I believe that a franchisor’s success depends equally on two factors: 50% on the strength of the business model 50% on the leadership they cultivate within their franchise network Without strong leadership, even the best business model will fall short of its full potential.