The financial advantage to the parent company (the franchisor) in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

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Shared profits are an important aspect of most franchise arrangements. The franchisee will pay the franchisor an up-front fee for the opportunity to use the business name, and the right to sell the product or service. Besides this fee, the franchise agreement almost always includes royalty payments. The franchisee will pay the franchisor a percentage of revenues or profits for the entire contract period.

The Financial Advantage to the Parent Company (The Franchisor) in a Franchise