How Are Ongoing Fees Calculated When Buying a Franchise?

The initial fee in a franchise offer is easy to compare; the real uncertainty often lies in the payments that begin once the business opens. Two brands quoting the same fee percentage may have different monthly costs because of the calculation basis and additional charges. Before joining a franchise network, you need to answer not only “How much will I pay?” but also “Which transactions will I pay on, when, and under what conditions?” This guide explains how to assess the impact of ongoing fees on your agreement and cash flow.

1. Bring all ongoing payments together in one schedule

The first step is to request not just the offer pack, but also the agreement, fee schedules and any operations manual referred to in the agreement. If payment obligations are spread across several documents, it is easy to overlook the total cost. Record each document’s date and version, and establish which document sets out the fees you have been quoted.

Check each of the following items separately:

• Ongoing franchise fee: This may be a fixed amount, a percentage of turnover or a combination of the two.
• Advertising and marketing contribution: A contribution to a national fund may be required alongside compulsory local spending.
• Technology fees: There may be separate charges for the point-of-sale system, ordering app, reporting tools and user licences.
• Other recurring service charges: These may cover services such as a call centre, customer loyalty programme or inspections.

For each item, record the payee, calculation method, tax treatment, due date and rules for increases. Do not settle for wording such as “invoiced separately as required”; ask what triggers the charge and how the amount will be determined. Include third-party services that the brand requires you to use, even if it does not collect those payments itself.

2. Test the definition of turnover against individual transactions

For a turnover-based fee, the most important factor is not the percentage but the amount to which it applies. Do not assume that terms such as “gross sales”, “net sales” or “total revenue” are sufficiently clear on their own. The treatment of taxes, refunds and discounts should be set out in writing.

Ask the franchisor for a sample monthly calculation. In particular, look for answers to these questions:

• Is VAT included in the calculation basis?
• In which month are refunds and cancellations deducted?
• How is a transaction recorded if the brand covers the cost of a discount voucher?
• Is the fee based on sales before the delivery platform’s commission is deducted?
• For gift cards, does the fee arise when the card is sold or when it is redeemed?
• Are fees payable on sales for which payment cannot be collected?

For example, calculating the franchise fee on sales before platform commission is deducted means that the fee basis differs from the amount reaching your bank account. This is not necessarily incorrect, but it must be reflected accurately in your budget. For gift cards and similar transactions, also clarify the recording method that will prevent the same sale from being counted twice.

3. Build minimum fees and increases into your cash-flow plan

Some agreements set a minimum monthly payment below which the turnover-based fee cannot fall. Under such an arrangement, lower sales do not mean the fee will fall proportionately. “A fixed fee plus a share of turnover” and “the higher of a fixed fee or a share of turnover” also produce different results.

Prepare low, expected and high sales scenarios in your own budget. The purpose is not to validate the brand’s sales promises, but to see how the fee structure works under different conditions. Calculate ongoing fees in each scenario and track the cash remaining after rent, staffing and other payments. Particularly during the opening months, show the timing gap between the fee invoice date and the date you receive the sales proceeds.

Check the fee-increase clause for the index to be used, the calculation period and the date of the first increase. If a fee is denominated in or linked to a foreign currency, ask your lawyer to check not only the exchange-rate risk but also whether the arrangement complies with the Turkish foreign exchange rules applicable to the parties and the transaction. Do not assume that every franchise payment is subject to the same rules.

4. Ask separately how advertising contributions are accounted for

An advertising contribution does not mean that every amount you pay will be spent directly on your own outlet. The fund may be used for national campaigns, content production or shared digital marketing. What matters is that the agreement explains the permitted uses and the accountability arrangements.

Ask whether an annual summary of activities and expenditure will be provided. Check whether the fund covers administration costs, whether unused amounts are carried forward and whether campaign discounts are charged to you separately. If there is a compulsory local advertising budget in addition to the fund contribution, calculate the two obligations together.

Put your right to request reports in writing rather than assuming it exists. Specify what the reports will contain, how often they will be provided and who will answer your questions. This will help you distinguish the network’s shared promotional spending from your own business’s marketing costs.

5. Secure fee transparency in the agreement

Türkiye has no dedicated franchise law governing franchise agreements exclusively. Nor is there a generally mandatory pre-contractual disclosure document or registration system specifically for franchising. This does not mean that the parties are exempt from general legal rules.

The provisions on contracts and standard terms in the Turkish Code of Obligations No. 6098, together with the relevant provisions of the Turkish Commercial Code No. 6102, apply. Depending on the nature of the relationship, the Law on the Protection of Competition No. 4054 and the Industrial Property Code No. 6769 may also be relevant. General principles of good faith and the circumstances of the case may also give rise to liability for pre-contractual conduct.

Before signing, ask for the fee schedule to be attached to the agreement, for an order of precedence to be established where documents conflict, and for a procedure to challenge calculation errors. Have your lawyer review any power to introduce new fees or change the calculation basis unilaterally, and discuss the tax implications with your accountant.

The practical takeaway: If the amount or formula, calculation basis, due date and rules for changes are not recorded in writing for every recurring payment, your monthly cost is not yet clear. Complete the sample calculation before committing to pay.