Franchises

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?
min read
Opinions expressed by Entrepreneur contributors are their own.

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.�

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