The primary reason for the franchise arrangement is the increased net profit for the franchisee in using the franchisor’s name, logo, brand, or trademark. The franchisor charges an upfront fee called a Franchise Fee, monthly Royalties, in some agreements a License Fee and Marketing/Advertising minimums. These additional costs to the franchisee are paid to use the franchisor’s name.
A marketing fee is a function of the franchise agreement requiring the franchisee to conduct marketing in spreading the value of the brand or franchise name. Often a marketing fee is included because the franchisor manages the marketing and advertising for the franchises.
The marketing fee is customarily 1.5% to 2% of all sales.