Is the assumption of flat fee royalty payments for home-based franchises consistent with the fact that franchised tutoring services charge a fixed rate?You might expect to see flat royalty...
Is the assumption of flat fee royalty payments for home-based franchises consistent with the fact that franchised tutoring services charge a fixed rate?
You might expect to see flat royalty payments in hm-based franchises, but not for revenue-based franchises operating from commercial bldings. They typically charge a revenue-based royalty. Franchised tutoring services often charge a fixed royalty per student enrolled. I am trying to determine if this is consistent with the assumption that home-based franchises charge a flat rate and franchises who operate from commercial buildings charge a revenue-based royalty.
Yes, this is consistent. It makes sense for the franchisor in this situation to charge the franchisee a flat fee per student enrolled. The main reason for this is that it gives the franchisor a relatively guaranteed revenue stream even if the franchisee is relatively unsuccessful.
Tutoring businesses do not have the sorts of almost guaranteed revenue streams that more commercial businesses like McDonald's do. Therefore, the franchisor will want to get a flat fee. They will want to get money every time a student signs up rather than having to rely on that student continuing to pay out the money that is required for ongoing tutoring.
The less certain a franchise's success is, the more the franchisor will want to charge a flat fee. Tutoring is not something that is practically certain to succeed and therefore a flat fee in that sort of business is consistent with the expectation you mention.