Of course, your decision should never be based solely on the flat fee royalty versus percentage royalty, but let’s just delve into this a little deeper and see what is really behind the reasons why franchisors take a very different approach to their monthly charges.
At first glance a flat royalty fee seems like a good option. You get to keep all the upside on your performance. No matter how well you do the monthly franchise royalty fee to your franchisor remains the same.
At énergie Franchise we believe that it is the philosophy of the franchisor that dictates the monthly charging method that they use. For example, énergie take an integral interest in the success of each franchisee and have a philosophy of helping to maximise the club and the franchisees performance. This philosophy is reflected in the whole approach of the company to supporting franchisees. From the collection and analysis of all franchisees management accounts to ensure optimum performance, to staff in the field visiting clubs and advising on improvements to performance every single day, driving improvement in our franchisees businesses is at the heart of everything we do.
This is why every club has a Central team mentor whose job it is to help you maximise your clubs performance. You are probably already aware of the tremendous results that our club launch specialists have in helping franchisees achieve fantastic numbers of members even before the club has opened its doors for business.
When you consider that the running costs of most gyms are fairly fixed, any improvement in turnover could go straight to bottom line profit. A franchisor charging a percentage has a direct interest in helping you to increase your income
This begs two questions:
1. If your franchisor gets the same amount of money no matter what your performance what incentive do they have to help you improve your business and drive your performance to higher levels?
2. If the flat fee franchisor is not staffed up to give you the help, support and guidance to maximise the performance of your business then do they have the staff and ability to help you when things may not go according to plan? énergie Franchise have experts on hand to be able to help identify the problem should one arise and, more importantly, set a course of action to bring about the solution.
It is not a question of whether a flat rate franchisor would like to help; it is whether they have sufficient resources to be able to do so?
If the franchisor is a master franchise from another country then they are likely to be passing back around 25% or more of their total income to the owners of the franchise system, giving them even less money to work with.
The illusion in a nutshell
At énergie we work tremendously hard to maximise your income and profit. If we can increase a clubs income by say £30,000 in a year we will earn an extra £1,800 per club. This is a great incentive for us to help all of our clubs to increase their income. Oh and by the way, if we could do this with you then you would earn an extra £28,200. Still think you are saving money with a flat rate “low cost” fee?
We have plenty of illustrations we can show you of how this works in practice and we are happy to demonstrate the incredible level of support you will have. Please get in touch for more information.
