Just want to highlight some basic standard terms Royalty is usually on sales because it's easy to calculate and is independent. Charging a royalty on print is not feasible as it would also be influenced by the franchisees ability to operate the business Also by charging as a % of sales a business model can be created. Royalty becomes a cost in the model, same as gst Rebates are common. It's very hard for a franchise system to be profitable on only royalty. Rebates are required. However a good franchise system uses its buying power to push down supplier prices. So even with rebates the price to the franchisee should be lower than if the franchise was trying to negotiate directly with the supplier as a stand alone business Franchisers cannot automatically buy back a franchise for a % of purchase price. Let me highlight this with a simple example. A shopping centre lease of 7 years. By year 5 with only two years to go on the lease, there would not be much value left. The main profit would have been made in the first few years.
RFG Price at posting:
$3.25 Sentiment: None Disclosure: Held
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