---
title: "Understanding Franchise Fees"
url: https://burnaze.com/article/80a4f815-cc57-4e2a-9d48-1977a815ad69
source: "1851 Franchise"
original_url: https://1851franchise.com/what-is-a-franchise-fee-2717526
category: "Franchise Industry"
industry: "Franchise Industry"
published: 2021-12-22T19:14:00.000Z
modified: 2026-11-01T01:19:37.024Z
image: https://newimage.1851franchise.com/cdn-cgi/image/quality=85,format=webp,width=1280,height=720/story/featureImage/7ebc07ff548d1ae1207772929759c8331705.jpg
---

# Understanding Franchise Fees

**TL;DR:** A franchise fee is a one-time payment made by an incoming franchisee to a franchisor in exchange for the right to replicate the business model and concept. The Federal Trade Commission defines franchising and requires a minimum payment of $500 to be considered a franchise.

*originally published in 1851 Franchise on 2021-12-22. [Read the original](https://1851franchise.com/what-is-a-franchise-fee-2717526).*

## Story

A franchise fee is a certain amount of money that is paid to a franchisor by an incoming franchisee in exchange for the right to replicate the business model and concept. Under the Federal Trade Commission, which defines franchising throughout the United States, a business can only be considered a franchise if the franchisee makes a payment to the franchisor of at least $500 (annually adjusted) either before or within six months of opening the business.

As opposed to ongoing royalty fees or overhead costs , the franchise fee is, usually, a one-time payment, but can also be paid incrementally depending on the terms of the franchise agreement .

The cost of a concept’s franchise fee will be disclosed in the brand’s Franchise Disclosure Document , and is often included as a supplemental fee in addition to the outlined startup costs. Franchise fees are generally in the range $20,000 to $50,000 depending on the brand.

## Entities

- 1851 Franchise (publication)
- Franchise Industry (sector)
- franchising (topic)
- franchise fees (topic)
- Federal Trade Commission (regulator)
- ftc rule (topic)

---
Originally reported by 1851 Franchise (https://1851franchise.com/what-is-a-franchise-fee-2717526). Summarized by Burnaze (https://burnaze.com/article/80a4f815-cc57-4e2a-9d48-1977a815ad69).