Franchise Fees In New Zealand: A Complete Guide (2026 Updated)

Buying into a franchise can feel like the best of both worlds: you get a proven brand, systems, training and (usually) a roadmap for how to operate.

But before you sign anything, it’s essential to understand what franchise fees really are, how they’re typically structured in New Zealand, and what you’re actually paying for. This 2026 update reflects the current way franchise businesses commonly operate (including stronger digital marketing, platform fees, and tech-driven systems that can affect your ongoing costs).

In this guide, we’ll break down the most common franchise fees in NZ, what’s negotiable (and what usually isn’t), the legal and practical risks to watch for, and the key documents that should support the fee structure.

What Are Franchise Fees (And Why Do They Matter)?

Franchise fees are the payments you make to the franchisor (the owner of the franchise system and brand) in exchange for the right to operate your franchised business.

They matter because franchise fees can:

• Drive your start-up costs and how much capital you need upfront
• Impact your profitability month-to-month (especially if there are royalties and marketing levies)
• Determine what support, training, technology and brand value you receive
• Create legal obligations that last for the full term of the franchise agreement

Even if a franchise looks profitable on paper, the fee structure can make or break the business. That’s why you should treat the “fees” section of a franchise agreement as part of your due diligence, not as a standard page to skim.

Franchise Fees vs “Normal” Business Expenses

It’s also helpful to separate franchise fees from ordinary operating costs:

• Franchise fees are paid because you’re part of a franchise system (e.g. royalties, marketing levy, renewal fees).
• Operating expenses are what you’d typically pay in any business (e.g. wages, rent, inventory, insurance).

In practice, franchisors often influence both. For example, you might be required to use certain suppliers, systems, or branding providers (which can indirectly affect your costs even if it’s not labelled “a fee”).

What Types Of Franchise Fees Are Common In New Zealand?

Most NZ franchise systems use a mix of upfront and ongoing fees. The names vary, but these are the categories you’ll see most often.

1) Initial Franchise Fee (Upfront Fee)

This is the one most people expect: the upfront payment to join the franchise system.

It commonly covers things like:

• Initial training (for you and sometimes your managers)
• Access to operational manuals and systems
• Site selection support or set-up guidance (depending on the model)
• The right to use the brand and intellectual property during the franchise term

Important point: paying an initial fee doesn’t usually mean you “own” the brand or system. You’re paying for a licence to use it under strict rules for a set period.

2) Ongoing Royalty Fees

Royalties are ongoing payments to the franchisor for continued use of the franchise system.

They’re commonly charged as:

• A percentage of gross sales (for example, X% of weekly turnover), or
• A fixed weekly/monthly amount (sometimes indexed or increased over time)

Royalties based on gross sales can feel tough because you pay them even if your expenses go up and your profit goes down. That doesn’t make them “bad”, but it does mean you need a realistic budget and strong cashflow planning.

3) Marketing Or Brand Fund Contributions

Many franchisors require franchisees to contribute to a marketing fund (sometimes called an “advertising levy” or “brand fund”).

This is usually separate from royalties and is intended to support things like:

• National or regional advertising campaigns
• Digital marketing (including paid ads, SEO, social campaigns)
• Brand assets and content production
• Website development and maintenance

One of the most common pain points we see is when franchisees pay into a marketing fund but aren’t clear on how it’s spent, or whether they’ll receive local area marketing support. Your franchise agreement (and disclosure) should spell out how the fund is managed and what reporting is provided.

4) Technology, Platform Or Software Fees

Modern franchise systems often rely on tech: POS systems, booking platforms, delivery integrations, CRM tools, rostering software, and online ordering systems.

You may be charged:

• A direct technology fee payable to the franchisor
• Mandatory subscription fees payable to third-party providers
• Set-up, onboarding, or hardware costs

These costs can be totally reasonable if they genuinely support consistency and efficiency across the network. The key is understanding whether the fee is fixed, whether it increases, and what happens if the franchisor changes providers mid-term.

5) Training Fees (Initial And Ongoing)

Some franchise models include training in the initial franchise fee. Others charge separately for:

• Refresher training
• New product/service rollouts
• Additional staff training
• Annual conferences or mandatory network meetings

Training can be a genuine value-add. But you still want clarity on what training is included, what’s charged extra, and whether travel/accommodation is on you.

6) Renewal Fees, Transfer Fees, And Exit Fees

Franchise agreements often include fees for key lifecycle events, such as:

• Renewal fee: if you extend the franchise after the initial term
• Transfer fee: if you sell the franchised business and the franchisor approves the incoming franchisee
• Exit/de-identification costs: if you stop operating and need to remove signage, branding, uniforms, vehicles, or digital assets

If your plan is to build the business and sell it later, these fees are especially important. It’s also worth checking whether the franchisor has approval rights over any buyer (and what conditions apply).

How Are Franchise Fees Calculated (And What Should You Budget For)?

There’s no one-size-fits-all approach, but there are a few calculation methods you’ll see repeatedly. Your job is to map them against your projected revenue and costs so you understand your true break-even point.

Percentage Of Gross Turnover

This is common for royalties and marketing contributions.

Make sure you understand:

• What counts as “gross turnover” (e.g. does it include GST, delivery fees, vouchers, refunds?)
• How often it’s calculated and paid (weekly, fortnightly, monthly)
• How reporting works and whether the franchisor can audit your books

If your agreement references “gross revenue” or “gross sales” without a clear definition, that’s a red flag. Definitions matter because they decide how much you pay.

Fixed Fees

Fixed fees can be easier to forecast, but you should check:

• Whether they increase over time (e.g. CPI increases or staged step-ups)
• Whether they change if your territory expands or if you add new sites

Blended Models

Some franchises use a blended model, such as:

• Lower royalty percentage plus a higher marketing levy
• Base royalty plus additional fees for support, software, or call centres

The overall “effective rate” matters more than the label. Two franchise systems can use totally different fee structures but cost you the same (or very different) amounts in practice.

Don’t Forget One-Off Set-Up Costs

Even if they’re not “franchise fees”, you’ll likely need to budget for:

• Fit-out and equipment
• Initial stock
• Insurance
• Signage and branding
• Professional services (accounting and legal)

If the franchise includes a lease (or you’re taking over an existing premises), you may also be dealing with lease negotiation and assignment issues, and it’s worth understanding your position under a Commercial Lease Agreement.

What Legal Documents Typically Set Out Franchise Fees?

Franchise fees shouldn’t be “understood” based on a sales conversation or brochure. They should be clearly documented, so you can verify what you’re paying and what you receive in return.

The Franchise Agreement

The franchise agreement is the main contract that sets out:

• Fee types, amounts, and payment timing
• What happens if payments are late
• Interest, default consequences, and termination rights
• Reporting requirements and audit rights
• Renewal, transfer, and exit costs

This document is usually heavily franchisor-friendly (which is common in franchising), so you should understand the risks before signing. If you’re buying an existing franchise business, you may also see business sale documents like an Asset Sale Agreement as part of the transaction.

Disclosure And Pre-Contract Information

In New Zealand, franchising is largely “self-regulated” compared to some other countries, but many reputable franchisors follow the Franchising New Zealand Code of Practice and provide disclosure-style information.

From a practical standpoint, you want clear pre-contract documents that explain:

• All fees (upfront, ongoing, and event-based)
• Estimated establishment costs
• Any supplier rebates or commissions (and whether the franchisor benefits)
• Marketing fund management and reporting

Even where disclosure isn’t legally mandated in the same way as other jurisdictions, misleading statements can still create serious issues under the Fair Trading Act 1986 (more on that below).

Operations Manual And System Requirements

Sometimes the “hidden costs” sit in the operations manual, not the agreement itself. For example, the agreement might allow the franchisor to update required systems, suppliers, product lines, uniforms, or tech platforms.

This can be normal (franchise systems need consistency), but you should understand how much flexibility the franchisor has to impose new requirements that increase your costs.

Related Agreements (Lease, Supplier, Finance, Staff)

Depending on the franchise model, you might also need to sign or deal with:

• A lease or lease assignment (especially if you’re taking over an existing site)
• Supplier terms or mandatory purchasing arrangements
• Finance documents if there’s vendor finance or lending involved
• Employment documents for your team, like an Employment Contract

It’s worth getting these reviewed as a package, because your business risk often sits in how these documents interact.

What Laws Apply To Franchise Fees (And What Can Go Wrong)?

Franchise fees aren’t just “commercial terms”. They connect directly with legal obligations, especially around how the franchise opportunity is marketed and how disputes are handled.

Fair Trading Act 1986: Misleading Claims About Costs Or Profits

The Fair Trading Act 1986 generally prohibits misleading or deceptive conduct in trade.

In a franchising context, risk areas include:

• Revenue or profit projections that aren’t properly supported
• Understating likely start-up costs or ongoing fees
• Marketing claims about “guaranteed returns” or “proven profitability” without proper basis
• Failing to clearly disclose mandatory costs (including tech fees and supplier costs)

If you’re relying on claims made during the sales process, it’s smart to ask for them in writing and ensure the contract reflects what you were told. Issues can also arise through misrepresentation, especially where key information influenced your decision to sign.

Contract Law: The Agreement Will Usually Control

Franchise agreements are contracts. Once you sign, you’re usually locked into the fee structure for the term, unless the agreement allows changes.

This is why it’s crucial to review:

• Variation clauses (can the franchisor change fees unilaterally?)
• Termination clauses and what you still owe if the agreement ends early
• Restraint and post-termination obligations (often tied to protecting the brand)

If you’re ever unsure about what a clause really means in practice, getting advice early is far cheaper than trying to untangle it later.

Privacy Act 2020: Customer Data And System Fees

If the franchise uses shared systems (booking platforms, CRM, email marketing tools), customer data will often flow between franchisees and the franchisor.

That can affect how you approach compliance under the Privacy Act 2020, including transparency about data collection and use. Many businesses need a properly tailored Privacy Policy, particularly if you’re collecting customer details online or through franchise-mandated platforms.

Employment And Health & Safety: Fees Don’t Replace Your Obligations

Some new franchisees assume the franchisor’s “system” covers everything. In reality, you still run your own business and you’ll have legal duties as an employer and as a person conducting a business or undertaking (PCBU).

For example:

• You’ll need appropriate employment terms and workplace policies.
• You must manage health and safety risks in your workplace, even if the franchisor provides templates.

The franchisor can support you, but they can’t outsource your core legal obligations.

How Do You Negotiate Franchise Fees (And What Should You Ask Before Signing)?

Some parts of a franchise fee structure may be negotiable, especially in smaller or newer systems. In larger systems, fees are often standardised for consistency (and franchisors may be reluctant to offer different terms to different franchisees).

Either way, you should treat the negotiation phase as your best chance to clarify costs and reduce surprises.

Questions To Ask About Upfront Fees

• What exactly does the initial franchise fee include (training hours, materials, support)?
• Is there a separate site set-up fee, project management fee, or onboarding fee?
• If the franchise doesn’t proceed (for example, lease falls through), is any of the fee refundable?

Questions To Ask About Royalties And Ongoing Fees

• Are royalties calculated on gross sales including GST, or excluding GST?
• Do you pay royalties on online orders, third-party delivery, or vouchers?
• Are there minimum royalties payable even if sales are low?
• Are there additional fees for audits, support, mystery shoppers, or compliance checks?

Questions To Ask About Marketing Funds

• How is the marketing fund held and accounted for?
• Do franchisees receive reporting on fund spend?
• How much is spent nationally vs locally?
• Are you required to spend extra on local marketing on top of the levy?

Questions To Ask About Technology And Supplier Costs

• What systems are mandatory and what are the monthly costs?
• Can the franchisor change systems during the term, and who pays for upgrades?
• Do supplier rebates exist, and does the franchisor receive them?

Get The Legal Review Done Before You Commit

This is where many people get caught out: they fall in love with the brand, then sign quickly to “secure the territory”.

Don’t stress - you can still move quickly while being sensible. A legal review helps you understand:

• What you’re actually required to pay (and when)
• What you get for those fees
• Which obligations survive termination (and what an exit really costs)
• Whether you have a workable pathway to sell the business later

If you’re also setting up a company to operate the franchise, make sure the internal rules are clear from day one with a Company Constitution where appropriate, especially if you’re going into the franchise with a business partner or investor.

Key Takeaways

• Franchise fees usually include an initial franchise fee, ongoing royalties, marketing levies, technology/platform fees, and event-based fees like renewal or transfer fees.
• How fees are calculated matters just as much as the headline numbers, particularly where royalties are based on gross turnover.
• Your franchise agreement should clearly define what counts as turnover, when fees are payable, and what happens if fees are late or the agreement ends early.
• Fees can be closely linked to wider legal risk, including misleading claims under the Fair Trading Act 1986 and potential misrepresentation issues if key information wasn’t disclosed properly.
• Don’t overlook “non-fee” costs that function like fees in practice, such as mandatory technology subscriptions, supplier pricing, and fit-out requirements.
• Getting a franchise agreement reviewed before signing is one of the simplest ways to avoid expensive surprises and protect your business from day one.

If you’d like help reviewing a franchise agreement or getting your business set up with the right legal foundations, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.