What Do Franchisees Typically Have To Pay To The Franchisor?

Joining a franchise can be a smart way to run your own business with the backing of a proven brand. But before you sign anything, it’s essential to understand the fees you’ll pay to the franchisor and how those costs are structured over the life of the agreement.

In Australia, franchise fees are guided by the Franchising Code of Conduct and set out in your disclosure document and franchise agreement. The mix of upfront charges, ongoing royalties, marketing levies and other contributions will affect your cash flow and overall profitability-so the more clarity you have now, the better your decisions will be.

Below, we break down the typical payments franchisees make, how they’re calculated, and what to watch for in your agreement. We’ll also share practical tips for budgeting, negotiating, and getting the right legal help before you commit.

How Do Franchise Fees Work In Australia?

Your fee obligations are primarily driven by two documents: the franchisor’s disclosure document (which outlines key facts and historical information) and your signed franchise agreement (which contains the legally binding terms). Together, they should clearly set out every amount you may have to pay-and when.

The Franchising Code requires franchisors to be transparent about fees, including how any marketing fund is managed and audited. Still, each network structures payments differently, and definitions matter. For example, “gross sales,” “net sales,” “turnover,” and “GST-inclusive revenue” can produce very different royalty outcomes once you look at the fine print.

Before you sign, make sure you closely review your Franchise Agreement and the disclosure document side by side. Confirm the fee list matches, and check how each fee is calculated, when it accrues, and whether it can change during the term.

Upfront Costs: What You Pay Before Opening

Most franchises require several payments before you start trading. These can include:

1) Initial Franchise Fee

This is the one-off fee you pay to join the network and access the brand, systems, and training. It can cover onboarding, initial support and the right to use the franchisor’s intellectual property for the term.

It’s often a fixed amount. Ask whether it includes initial training and site assistance, or if those are charged separately.

2) Site, Fit-Out And Equipment

Many franchisors require you to build or fit out the premises to a prescribed standard. You may purchase fit-out and equipment from approved suppliers or through the franchisor. In some systems, the franchisor coordinates the project and charges a project management fee.

If the business is premises-based, you’ll also need to secure a lease. As this can be one of your largest long-term commitments, it’s wise to get a Commercial Lease Review before you sign anything with the landlord.

3) Training Fees

Initial training may be included in the franchise fee, but not always. Some networks charge a separate training fee, plus travel and accommodation. Confirm what’s included and whether you’ll pay extra if you bring new managers on board later.

4) Opening Marketing Spend

Many networks require a launch campaign for your location. This could be a fixed amount or a minimum spend on local advertising. Understand how the spend is allocated and whether funds go to a national or local budget.

5) Legal, Accounting And Due Diligence

You’ll have your own professional costs, such as legal advice on your agreement and financial modelling. These are not payments to the franchisor, but they’re vital to budget for-especially where the fee structure is complex. Consider a focused Franchise Agreement Review before you commit.

Ongoing Payments: Fees You’ll Pay While Trading

Once you’re operating, you’ll typically make several regular payments to the franchisor or related entities. These can be weekly, fortnightly, or monthly.

1) Royalties (Service Fees)

Royalties are the core ongoing payment for the continuing right to operate under the brand and use the franchisor’s systems and support. Common approaches include:

• Percentage of turnover (for example, 6% of gross sales)
• Fixed fee (a flat weekly or monthly amount)
• Hybrid (a base fee plus a percentage or tiered percentage)

The definition of “turnover” is critical. Confirm whether it’s calculated on GST-inclusive or GST-exclusive sales, and whether refunds, discounts, gift cards or third-party revenue streams (such as delivery platforms) are included.

2) Marketing Or Brand Fund Contributions

Most national brands run a marketing fund to pay for brand-wide advertising and campaigns. Contributions are usually a percentage of turnover (for example, 2%), or a set periodic amount. Under the Code, franchisors must maintain proper accounts for the fund and often provide an annual statement. Clarify who approves spend and whether franchisees can access local marketing dollars.

3) Technology, Software And System Fees

Point-of-sale systems, cloud software, cybersecurity, e-commerce platforms and data tools can attract separate charges. Fees might be payable to the franchisor or to approved vendors. If customer data is collected, make sure your store has a compliant Privacy Policy and understands privacy obligations when using network systems.

4) Training And Support Fees

Refresher training, new system rollouts or expanded services can come with additional costs. Some networks include ongoing support within the royalty; others itemise specific programs. Check whether new modules are optional or mandatory (and therefore chargeable).

5) Supply And Rebates

You’ll often buy products or consumables from approved suppliers to maintain quality and consistency. Prices can include the franchisor’s margin or agreed rebates with suppliers. The Code has rules around disclosure of certain supplier rebates-review the disclosure document to understand how this works in your network.

6) Territory Or Renewal Fees

Renewal at the end of your term may attract a renewal fee. If your agreement allows territorial changes or expansions, those options may also incur fees. Confirm whether these amounts are fixed or can be adjusted by the franchisor over time.

Marketing, Technology And Other Common Charges

Beyond core royalties, many franchisees pay a range of specific charges that support brand consistency and growth.

Marketing Fund: What Exactly Are You Paying For?

Marketing funds typically cover national or regional advertising, creative production, media buying and sometimes brand research. Ask for clarity on:

• How contributions are calculated and when they’re due
• Whether local marketing is separate from the national fund
• How and when the fund is reported and audited
• What happens to unspent funds at year-end

Under the Code, franchisors must provide certain information about how the fund operates. If your business relies heavily on local promotions, check whether you can run local campaigns, and whether any Warranties Against Defects or promotional claims need to follow set templates for Australian Consumer Law compliance.

Technology And IP: Licences And Upgrades

The franchisor owns valuable intellectual property-brand names, logos, know-how and software. You’re effectively licensing that IP for your location. Fees can include software licences, mandatory hardware upgrades and security tools. If brand protection is important in your area, discuss how the network enforces trade marks and consider the broader role of trade mark registration in protecting the system’s goodwill.

Training, Mystery Shops And Quality Audits

To maintain standards, franchisors may run quality checks or mystery shopper programs. Sometimes these are included in the royalty; sometimes they’re charged as a separate fee if follow-up training or additional audits are required.

Transfer, Exit And Resale Costs

If you sell your franchise, expect a transfer approval fee and legal documentation costs. Some networks also require you to contribute to buyer training. Clarify whether you can set your own sale price, how goodwill is treated, and any refurbishment obligations triggered on transfer.

Hidden Or Indirect Costs To Budget For

Not all costs are labelled as “fees,” but they still affect your bottom line and cash flow.

Lease, Outgoings And Refurbishment

Premises-based franchises often require periodic refurbishments to maintain brand standards. These can be significant and may be required at set intervals (for example, every five years) or on renewal. Factor in landlord contributions, outgoings, and rent reviews as well-these can all be classed as operational costs, but they may be influenced by franchisor requirements.

Minimum Performance Or Minimum Stock Purchases

Some agreements set minimum performance levels or minimum stock orders. If you don’t meet them, you might face additional training costs or increased oversight. Understand the consequences of falling short and whether there’s support to help you return to target.

Staffing And HR Compliance

While not paid to the franchisor, wages, super and onboarding are major cost centres. Confirm whether the franchisor mandates certain training or award interpretation services (and who pays). Having a compliant Employment Contract and clear workplace policies from day one helps you avoid costly disputes.

Insurance And Indemnities

Expect mandatory insurances (public liability, product liability, sometimes cyber). Your agreement may require naming the franchisor as an interested party and meeting certain limits. Premiums and deductibles should be built into your cash flow planning.

Payment Processing Fees

If the franchisor mandates a particular payment gateway or loyalty app, check the merchant fees and how chargebacks are handled. Small percentages can add up quickly on high turnover.

Can You Negotiate Fee Structures Or Terms?

Sometimes, yes-especially on new locations, complex fit-outs, or when a franchisor is entering a new market. Negotiation is more likely to succeed if you come prepared with data and a clear rationale (for example, a rent profile that strains viability unless royalties are stepped in year one).

Areas that may be negotiable include:

• Royalty structure (percentage vs fixed fee, or a stepped ramp-up)
• Initial fee discounts for multi-site commitments
• Contributions to fit-out or launch marketing
• Longer cure periods for performance metrics
• Cap or transparency around tech fees and future upgrades

Any negotiated points must be reflected in the final signed agreement or a side letter. To protect your position, engage a Franchise Lawyer early, and lock in a thorough Franchise Agreement Review before you pay deposits or sign binding documents.

It’s also sensible to confirm the franchisor’s approach to national promotions and local area marketing, and how the marketing fund is reported to franchisees. A clear process can reduce disputes and unexpected levy increases later.

How Do Fees End If The Agreement Terminates?

Termination or expiry triggers a range of practical steps. You’ll usually have to cease using the brand immediately, return confidential information and IP, and pay any fees due up to the termination date. Some agreements include post-termination restraints (for example, non-compete periods). These aren’t “fees,” but they are legal obligations that affect your future plans, so read them carefully in the context of exit.

What About Disputes Over Fees?

The Code requires franchisors and franchisees to follow certain dispute resolution processes. If you’re concerned about how a fee has been calculated, raise it early, use the dispute process if needed, and keep thorough records. Having a well-drafted Franchise Agreement and consistent reporting systems makes resolving these issues much easier.

Key Takeaways

• Franchisee payments typically include an initial franchise fee, royalties, marketing fund contributions, tech and support fees, plus supplier and training costs.
• Definitions matter: check how “turnover” is calculated, whether fees are GST-inclusive, and when charges can be adjusted during the term.
• Budget for indirect costs like lease outgoings, refurbishments, merchant fees, insurance and HR compliance alongside franchisor fees.
• Always compare the disclosure document and the signed agreement to ensure every fee is consistently disclosed and clearly explained.
• Some terms can be negotiated-such as royalty structure and launch support-particularly for new sites or multi-unit deals.
• Get expert help early: a focused Franchise Agreement Review, a Commercial Lease Review, and compliant documents like a Privacy Policy and Employment Contract will help you manage risk and protect your investment.

If you’d like a consultation on franchise fees and your agreement, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.