How Do Franchise Incentive Programs Work?
Franchise incentive programs benefit both the franchisor and the franchisee. These programs attract potential franchise owners who may need a boost to start a new business. Incentives also make it easier for franchisees to expand their ownership territory or for business owners to turn their existing businesses into a franchise.
Franchise Incentive Programs
Franchise incentive programs are offers or benefits meant to entice prospective franchise owners. Franchisors offer different types of incentives, but these mostly come in the form of a discounted franchise fee, a marketing expenditure contribution, a fee deferment program, or a conversion incentive program. Franchisors can offer incentives to anyone, but many choose to offer incentives based on financial qualifications. Veterans, minorities, or existing franchise owners may also qualify for specific franchise incentive programs.
Discounted Franchise Fee
Marketing Expenditure Contribution
A marketing fee is part of the royalties franchise owners pay the franchisor. For Tide Cleaners, the marketing fee is 4 percent of net sales. Of that fee, 2 percent goes to the national ad fund, and the other 2 percent goes to local marketing. Some franchisors offer a marketing expenditure contribution, which allows owners to avoid paying the marketing fee until they reach a specific amount. Right now, Tide Cleaners is offering a limited-time incentive for new franchisees. They will receive a marketing expenditure contribution for their first plant store in the amount of $25,000. Existing owners who plan to open a Micro Drop Store or a Locker Only Drop Store will receive up to $7,500 of marketing expenses.
Fee Deferment Program
In some instances, franchisors can defer the payment of monthly royalty fees or the initial franchise fee. In the case of an initial franchise fee deferment, the franchisor may defer collecting the initial fee until the franchise is open for business. Tide Cleaners offers a limited-time fee deferment incentive for existing owners who plan to open a Micro Drop Store or a Locker Only Drop Store. Right now, project management fees and start-up assistance fees will be deferred until one year after opening.
Conversion Incentive Program
Business owners can often benefit by turning their existing business into a franchise location. Not only will they receive the perks of joining the franchise system, they can also bypass some of the initial fees required of new owners. Tide Cleaners offers a conversion incentive program for dry cleaner or laundry services business owners. Owners who convert existing, non-franchised dry cleaner businesses to Tide Cleaners locations may avoid having to pay royalties for six months.