This is a question I get asked a lot, so here is a straight and realistic answer to this question:
In terms of percentage of franchise fee that franchise recruitment consultants will look to take, it varies vastly according to their expertise, experience, what they’re used to, and, at the moment, unemployment can lead to consultants working on lower commissions.
Good franchise recruitment consultants will usually work on a mix of monthly retainer and commission with the monthly retainer varying from £250 – £1,000 per month and commission varying from £1,500 to £4,000 (or between 10 and 25% of the franchise fee) depending on if you’re paying them a retainer or not.
My advice to you would be to ensure that the costs of recruitment are included in your franchise fee and these include:
1. Advertising/Marketing costs to generate franchise leads (whether online, shows, print media, etc) – You should allocate a cost of at least £2,500 per franchisee recruited. After 12 months you will know the exact figure by being able to divide direct advertising costs by franchisees recruited, but for now £2,500 is a realistic and achievable figure (depending on what your
franchise fee is)
2. Commission costs – it is best to work on allocating 20% of your final franchise fee figure to a paid commission, although this 20% may end up being a mix of retainers and commission.
The summary is that franchise recruitment is not easy, nor is it cheap and too many brands are advised badly by franchise development consultants, who get paid to get you to the point of being able to recruitment franchisees but have no expertise in that field, and in order to win the work, will not go out of their way to tell franchisors about the pitfalls and costs of
recruitment.
If your franchise fee was going to be set at, say, £20,000, then you should expect the recruitment costs to account for at least 25-30% of this fee. What is left should cover all other direct costs involved including materials as well as training, support, etc. After this most franchisors will usually take a certain amount as profit, but effectively this will cover the costs of development initially, and then become part of an ongoing recruitment fund, which should be run almost as a separate business.
I see far too many franchisors getting bad advice and going down the wrong route, and I don’t charge for this advice in the hope that at some point you may see value in some of the areas we may be able to help you when the time is right.
