Hi, I recently moved back to my hometown near Los Angeles and am planning to opening a new dojo under the same name as my sensei's, but fully owned, incorporated, and operated by me - so basically a franchise. He currently operates out of 1 full-time location. The new location is about 12 miles driving distance from the original so both he and some students who live between can visit from time to time, which will really help bootstrapping (an essential reason I'm starting up under his name and not my own). What is a reasonable franchise fee + royalty percentage under such circumstances? He's not big on writing up contracts or logistics and such, so it's up to me to write up the franchise agreement and ensure I'm offering him numbers that are reasonable. His baseline business health: he has 5 stars on both Google and Yelp and is willing to amend his website to include my location so I can piggyback off his SEO due to both the economy and personal losses, his business took a hit over the past year but was recovering nicely in 2018-2019 until COVID hit I have been assisting unpaid at his dojo for the past 2.5 years, re-learning the ropes of teaching (it's been 20 years since I stopped training with him when I left for college), and have in particular put in a lot of hours getting him through COVID I'm considering a one-time franchise fee of $10K, with a recurring royalty of 5% or maybe 10% of gross revenues. The latter depends on whether marketing budget is covered by royalty or separate - at the moment he only spends $300/month on Yelp, but I'm thinking about going for a Spanish-language radio and/or YouTube buy to maximize impact per cost. These numbers are based on what I've read is typical for "normal" franchises, but I'm wondering whether there are customs specific to karate dojos?
All the best to you. I think you'll have to see if what you are getting are in line with what you are paying. I don't have a lot of good answers for you, but as you write it, you may wish to consider adding in some other stipulations... For example, will the senior instructor be obligated to assist on testing boards? Are you obligated to sit on his testing boards? Will the senior instructor be providing instruction once in a while (maybe once a month for franchise instructors or black belts)? Will he get a piece of the testing fees of your students? Do certificates and ranking come through him or can you do that yourself through your federation? Do you have to purchase uniforms and patches and such through him or can you do it on your own?
Personally I have never herd of anyone paying upfront for a franchise from their instructor before. but i can see that it might have its advantages. it sets you up on a formal business footing. It can be tricky going from a student - Sensi relationship to business associate relationship. 5% of gross income seams a lot. Overheads can mount up. and it can take time to get a club up and running. It would make more sense to me to give a % of net profit. Gradings are another potential point of contention. will you be able to award all grades to your students or will he reserve the right to pass / fail blackbelts? Have you worked out where your income will come from? Gradings are a significant income stream contributing to financial viability. Do you get to keep all the funds for the gradings or would he want a cut (over and above the suggested loyalty fee). Will he want to attend gradings? will he want to be paid for attending gradings? You will want to stick to the club syllabus as much as possible. But will you be given flexibility to modify it if you want to - e.g. adjust it to allow younger children to start training. will you be allowed to develop new products like self defence seminars?
Will you have access to reference material - e.g videos of your sensei performing kata (important for maintaining consistency in the club)
