This ad will close in
Question added to topic FranchisesJune 30, 2008

As a wholesale distributor, how much should I offer a franchisor on the front end to service its franchisees?

We serve frozen dessert retailers (ice cream, frozen yogurt, etc.), and we've been given the opportunity to service a franchise company. This oppurtunity would be huge for us and we are scheduled to present our proposal in two weeks. I understand it's customary for distributors to give the franchisor a "kickback" or front-end commission based on sales. If this is true, is there a standard rate in terms of sales, and what percentage is reasonable?

The franchise industry is all over the board when it comes to accepting payments from vendors and suppliers.�Many franchise companies do not accept any such payments (instead negotiating for lower prices for their franchisees). Others accept them but require the payments to be made into the franchisees' advertising fund. Still others accept these payments and put them into the corporate coffers.�

Whatever approach is used, if any payments or rebates are accepted, then that fact must be disclosed in the franchisor's FTC mandated disclosure documents so it is a matter of public record.

Here's my suggestion for you.�Simply ask the franchise company what is standard in its operation--there are no secrets in this type of matter, so the franchisor should be willing to tell you straight up. Then factor it into�the pricing of your bid.�

Jeff Elgin has almost 20 years of experience franchising, both as a franchisee and a senior franchise company executive. He's currently the CEO of FranChoice Inc., a company that provides free consulting to consumers looking for a franchise that best meets their needs.

0 Comments. Post Yours.

About ASK ENTREPRENEUR

Ask Entrepreneur is a question-and-answer forum for and by the Entrepreneur.com community. Send in your burning business question, or comment on someone else's now. Have a Question? Ask Now

Topics (over 1000+ answers)

Don’t see a topic? Suggest One

Ask Entrepreneur Q&A Hangouts

Google + Hangout With Shark Tank
Google + Hangout With Jason Falls
Google + Hangout With Angela Jia Kim
Google + Hangout With Grant Cardone