Franchise Fee Law and Legal Definition

Franchise fee is any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business or to continue a business under a franchise agreement. Upon paying a franchise fee, a franchisee obtains the use of the franchisor's mark as well as numerous sundry items such as initial training, set-up, and so on. It usually serves as a reimbursement to the franchisor for the costs of initial training and support for new franchisees. A franchise fee must be paid in whole before a business starts its operation under the franchisor’s name or with the franchisor’s assistance. Once it is paid, the franchisor and the franchsee are generally bound by certain responsibilities to the other. However, a franchise fee does not entitle a franchisee to everything s/he will need and nor will it entitle him/her to do whatever a franchsee likes. Usually, a franchise fee is determined on the basis of the stature of the business and not by the by location or by industry.