The Fees Nobody Tells You About Before You Sign a Franchise Agreement

Most people focus on the upfront cost when looking at a franchise. The franchise fee looks clear, simple, and easy to understand.

But that’s not where people get caught.

After 300+ discovery calls with franchise buyers, the biggest surprise isn’t the entry cost. It’s everything that comes after you sign.

This article is for serious buyers looking at a franchise or basketball franchise who want to understand the real costs before making a decision.

This article is based on a recent Courtside Conversations episode by Little Boomers Basketball founder, Emile Koorey.

Watch the Full Breakdown

The Biggest Mistake: Only Looking at the Franchise Fee

Most people go into a franchise thinking:

“Okay, it’s $50K. I can handle that.”

That’s incomplete.

The franchise fee is just the starting point. What matters long-term is what you pay every month, every year, and over the life of the agreement.

The people who get burned are not the ones asking too many questions.

They’re the ones who didn’t ask enough.

If you want a deeper breakdown of total costs, read The Real Cost of Starting a Kids Basketball Franchise.

1. Royalty Fees (Your Biggest Ongoing Cost)

This is the most important fee to understand.

A royalty fee is what you pay the franchisor for:

• Systems
• Support
• Branding
• Ongoing guidance

It usually comes in three forms:

• Fixed monthly fee
• Percentage of revenue
• Combination of both

This will likely be your largest ongoing cost.

If you don’t understand this properly, your profit expectations will be off from day one.

2. Marketing Fees (Two Different Models)

Most franchises have one of these:

Pay Per Lead

• You pay for each lead generated
• You pay whether you convert or not

Marketing Fund

• Fixed monthly contribution
• Head office manages ad spend
• Must provide reporting and transparency

You need to know exactly which model you’re buying into.

Because one affects cash flow. The other affects control.

3. Equipment Costs

This is where many people get caught off guard.

You might pay the franchise fee… then receive another invoice for equipment.

Examples:

• Basketballs
• Uniforms
• Training gear
• Machinery (for other industries)

Some brands include this. Others don’t.

Always ask for a full itemized breakdown.

4. Training Fees (Initial and Ongoing)

Training is not a one-time event.

There are usually two parts:

Initial Training

• Learning systems
• Learning delivery
• Getting operational

Ongoing Training

• Workshops
• Conferences
• Skill development

Also consider:

• Travel costs
• Accommodation
• Time away from work

Good franchises invest in ongoing training. But it comes at a cost.

5. Setup Fees

There are two sides to setup:

Technology Setup

• CRM systems
• Booking platforms
• Software licenses

Physical Setup

• Fit-outs
• Venue setup
• Equipment installation

These costs are often hidden inside the agreement.

You need clarity before signing.

6. Supplies (Ongoing and Non-Negotiable)

This is a long-term cost most people underestimate.

You will need to buy:

• Equipment replacements
• Uniforms
• Consumables

And in most franchise systems:

You must buy from approved suppliers.

Even if you can get it cheaper elsewhere, you can’t just switch.

That’s part of the agreement.

7. Insurance

Depending on the franchise, this may include:

• Public liability
• Workers compensation

These are usually annual costs.

They’re not optional.

And they protect both you and the brand.

8. Renewal and Transfer Fees

This is where long-term thinking matters.

Renewal Fee

• Paid when your agreement ends
• Required to continue operating

Transfer Fee

• Paid when you sell your business
• Often a percentage of sale price

Most people don’t think about this at the start.

But they should.

9. Audit and Compliance Fees

Franchisors have the right to audit your business.

This ensures:

• Legal compliance
• Brand standards
• Operational consistency

In some cases, you may be charged for these audits.

It’s part of protecting the network.

Common Mistakes People Make

• Only focusing on the franchise fee
• Not asking how royalties are calculated
• Ignoring marketing structure
• Assuming equipment is included
• Not factoring in travel for training
• Thinking they can use their own suppliers
• Not planning for renewal or exit costs

Key Takeaways

• The franchise fee is just the beginning
• Ongoing fees matter more than upfront costs
• Every fee should be clear before signing
• Ask for itemized breakdowns
• Think long-term, not just entry

FAQ: Common Questions People Ask

Do all franchises have these fees?

Most do, but the structure and amounts vary. You need to review each agreement carefully.

Can I negotiate these fees?

In most established franchises, fees are standard. Some flexibility may exist, but not always.

Are royalty fees worth it?

They can be, if the support, systems, and brand generate more value than the cost.

Can I avoid buying from approved suppliers?

No. Unless written approval is given, this is usually a breach of the agreement.

What fee surprises people the most?

Usually ongoing costs like royalties and marketing. Not the upfront fee.

Keen to learn more?

If you want to understand how this works in a real system, explore our Franchise FAQs.