What Do Franchisees Typically Have To Pay To The Franchisor? (2025 Updated)

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If you are considering buying a franchise business in 2025, it is essential to fully understand the variety of fees you will be required to pay to your franchisor. This knowledge will help you plan your budget and avoid any surprises down the track.

There are various fees involved when purchasing a franchise. Knowing which ones to expect-whether they are one-off payments or ongoing charges-can be incredibly useful as you evaluate your investment.

Let’s break down franchise fees and what they mean for you and your business, so you can head into negotiations with confidence. For further guidance on the legal requirements for starting a business, you might also check our comprehensive guide.

What Are The Initial Costs Of Buying A Franchise?

Once you have signed your Franchise Agreement, it is common practice to pay your initial franchise fee. In 2025, many franchisors are updating their fee structures to reflect evolving business models and market conditions.

An initial franchise fee is generally an upfront fixed payment made as a lump sum. This fee can vary greatly depending on the brand, industry, and business model. For many well-established brands, initial fees can range from around $50,000 to over $150,000.

This fee typically covers the cost of setting up the franchise relationship, including system integration, operating systems, initial training services, and the supply of basic marketing materials. It’s a significant part of your investment, so doing your research beforehand is crucial. You might also want to review our Legal Documents You Need For Franchising for more detail.

The exact amount of the initial franchise fee will depend on the specific franchise business you choose. It is always a great idea to ascertain a rough expected figure before entering into any final agreements. Additionally, our Selling A Franchise guide can offer further insights into current market expectations.

What Are The Franchisee’s Fit Out Fees?

A franchisee’s fit out fee is the cost associated with having your franchised business completely fitted out and set up. In 2025, as franchisors continue to refine their operational models, these fees often reflect the latest design, technology, and equipment standards.

Generally, whilst the franchisor organises the overall fit out, you as the franchisee are required to pay a fee that compensates them for their expertise and investment. This fee covers the cost of procuring equipment, installing infrastructure, and implementing branding elements.

For example, if your franchise business operates in the hospitality sector, your fit out fees may include costs for:

An industrial kitchen fit out;
A bar or dining area set up;
Essential operating equipment such as a cash register or modern point-of-sale systems; and
Business-specific branding elements like signage and interior decor.

The fit out fee will ultimately depend on the level of customisation and infrastructure required by the franchised business you are purchasing. More extensive equipment or specialised branding will naturally result in a higher fee.

What Are The Franchisee’s Legal Costs?

You are only required to pay for the legal fees incurred by the franchisor in relation to the preparation, negotiation, and execution of the Franchise Agreement. Effective from April 2025, the revised Franchising Code of Conduct ensures that franchisors can only pass on these specific legal costs to you if they are clearly detailed in your Franchise Agreement.

This means that any legal fees incurred after the Franchise Agreement is signed-for example, costs related to dispute resolution or additional legal documentation-cannot be transferred to you. Franchisors who attempt to recover costs beyond those directly associated with the Franchise Agreement may face substantial penalties.

Are There Any Ongoing Franchise Fees?

Yes, there are ongoing franchise fees that you will need to account for once your business is up and running. In 2025, these fees continue to be a standard part of the franchising model.

As the operator of a franchised business, you will be required to pay ongoing fees to your franchisor. These fees help maintain the support system and brand integrity of the franchise network.

Ongoing fees may include:

The cost of sustaining an ongoing relationship with the franchisor;
The cost of operating under the recognised franchised business name;
Royalties, which are typically a percentage of your profits;
Marketing or advertising contributions;
Administration costs; and
IT or platform fees that support head office functions.

The structure of these fees can vary – some franchisors charge a fixed monthly fee, while others base the fee on a percentage of sales or profits. It’s vital to review these terms carefully in your Franchise Agreement to ensure you understand what is expected.

For additional insights on calculating ongoing obligations, you might want to read our What Are Franchising Royalties article.

What About Fees In Relation To The Lease?

Depending on the type of franchise business you purchase, responsibility for organising the business’ lease or commercial space may vary. It is not uncommon for franchisors to assist franchisees in securing and negotiating lease arrangements.

Franchisors may lend their expertise to help negotiate favourable lease terms and share best practices from other franchisees. In some cases, the franchisor might even enter into the lease themselves, in which case they would manage the arrangement directly and then pass on portions of the costs to you.

In either scenario, additional fees such as rent, insurance, and repairs can apply. For further information on what to expect when leasing commercial space, view our detailed guide on Leasing Commercial Retail Space.

It is important that any fee arrangements relating to the lease are clearly detailed in your Franchise Agreement to avoid ambiguity and unforeseen costs later on.

What’s A Fair Fee, Is Due Diligence Important?

Absolutely. Exercising your due diligence is crucial to ensure you are paying fair and reasonable franchise fees. In today’s market, many franchisors are moving towards greater transparency in fee structures, which helps you understand exactly what you are paying for.

Researching industry standards and comparing fee structures across different franchise opportunities is essential. You may also want to seek advice from experts-our Contract Review and Redraft service is a great resource to ensure that your Franchise Agreement clearly outlines all fee obligations and protects your interests.

Furthermore, staying updated with the latest industry trends and regulatory developments, such as those outlined in the Franchising Code of Conduct, can help you negotiate better terms and avoid hidden fees. This proactive approach to due diligence can ultimately make your franchise investment far more secure and sustainable in 2025 and beyond.

Franchising Resources

Laws around franchising can be complex, and expert legal advice is crucial at every stage of the franchising process. We offer a number of resources to assist you, such as:

Need Help?

We’re here to help!

Having your Franchise Agreement drafted or reviewed by a professional lawyer can help ensure that you enter into a fair and reasonable agreement. For more detailed assistance, you might also explore our Legal Advice For Your Startup services.

At Sprintlaw, we can help you review your Franchise Agreement quickly and easily. Reach out to our team for a free, no-obligation chat at team@sprintlaw.com.au or call 1800 730 61.

Bella Duncan

Bella has experience in boutique and large law firms with particular interest in privacy and business law. She is currently studying a double degree in Law and Psychology at Macquarie University.