Understanding Fees with an Available Home Care Franchise
When you receive the franchise disclosure document (FDD) for an available home care franchise, you’ll want to take a close look at each and every detail. However, a few details in particular may feel more significant than others. For most entrepreneurs, fees associated with purchasing an available home care franchise are the first piece of information they seek out when reviewing a franchisor’s FDD.
Understanding fees in the world of franchising can be a bit complicated because comparing the fees of different franchisors won’t always give you the information you want. There’s no simple algorithm for determining the cost benefit of purchasing a franchise. Simply opting for one brand over another because they have a lower franchise fee isn’t the smartest way to go.
The fees you pay both upfront and on a regular basis can make a significant impact on your overall income, so they need to play a major role in your decision-making process. That’s why it’s important to understand the various fees that come with purchasing a franchise. You’ll also need to balance this information with the advantages that different franchisors offer in terms of support, marketing, brand reputation, and other essential criteria.
Types of Fees Associated with Available Home Care Franchises
There are two types of costs most commonly associated with purchasing an available home care franchise: the initial franchise fee and ongoing royalty fees. You can learn more about the differences between these fees as well as their potential impact on your experience as a franchisee below.
The Initial Franchise Fee
The initial franchise fee is a one-time investment that you’ll pay upfront to the franchisor. This fee covers the right to acquire the franchise location and become part of the franchise system. In addition, it typically covers onboarding costs for essential processes such as:
- Initial franchisee training
- Certain marketing campaigns
- Services the facilitate the location’s launch
The initial franchise fee is always disclosed under Item 5 of the franchisor’s FDD, and may vary based on the size of the franchise location’s territory. For example, at Visiting Angels®, our franchise fees are $49,950 for a population of 100K, $59,950 for a population of 200K, and $79,950 for a population of 325K.
Many franchisors try to lower their franchise fees to appear competitive while at the same time inflating their royalty rates. It’s, therefore, important to avoid considering the initial franchise fee as your main cost when evaluating available home care franchises.
You’ll also want to look at Item 7 in the FDD (the Estimated Initial Investment section) to learn about other upfront costs you can expect, as well as the franchisor’s royalty fees (found in Item 6 of the FDD), before doing any calculations.
Unlike the initial franchise fee, royalties are typically paid to the franchisor on a monthly basis. These payments may be charged at a fixed rate or based on a percentage of your profits. They are typically reinvested in franchisees through ongoing support and corporate marketing campaigns. You can also think of them as something like payments for a trademark license.
When calculated based on revenues, royalty fees often range from 3%-9%, with the standard in the home care industry being around 5%. At Visiting Angels, we make sure our franchisees can experience the rewards of the hard work they put into their businesses by offering sliding scale royalty rates. That way, the more our franchisees earn, the less they have to pay on each dollar. This encourages Visiting Angels owners to continue growing their businesses rather than feeling penalized for making a profit.
The royalty rates for our available home care franchises start at 3.5%, a full 1.5% under the standard rate of other home care franchisors. Moreover, these rates can go as low as 3%, and we never charge tiered royalty rates. As a result, franchisees pay the lowest percentage from their first dollar when they reach the benchmark for a lower rate.
You can learn more about the fees for an available home care franchise from Visiting Angels by calling 800-365-4189 today or reaching out to us online for details about our franchise opportunities!