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I question at this early stage in the industry whether the ongoing franchise fees of 5-6% will kill the margins need to be worthwhile.

eBay drop offs

There are tons of eBay drop off stores popping up such as Orbit Drop, QuikDrop, and AuctionDrop’s relationship with The UPS Store . Many of them are franchises. None of the franchises have a household brand name, so the value of the franchise is in the training. Orbit Drop, for example, receives a fee of 35% of the selling price up to $501, then the percentage reduces free lessens as the sale price increases.

Is the franchise brand, training and support worth the $15,000 franchise few and 6% royalty? Probably not for someone with mild business savvy who has experience selling on eBay. $5,000 franchise fee + 3% royalty would be my limit, which is enough to pay for a good consultant to help you set up and maintain your business systems. Most high volume eBay sellers are already familiar with eBay and the eye-popping 3rd party eBay selling tools. If you are going to open your own store (besides regitering a state and federal trademark for you store’s name), go visit and learn from similar franchises in your area. Spend that $15,000 on your store and marketing.

I think the idea is good, and I was wondering when someone would start these. But, I question at this early stage in the industry whether the ongoing franchise fees of 5-6% will kill the margins need to be worthwhile. Look at other consignment and used reseller franchises such as Winmark’s Play It Again Sports to use eBay as another sales channel.

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April 7, 2005 UPDATE: Imagine this Sold is opening up their fist Canadina franchise. The franchise is fee is on the high side from what we’ve seen with others – $20,000 and for additional stores, $10,000 each. The royalty is 6% of net profit (all shipping & handling profits are excluded from net profits for royalty purposes). There is also a mandatory 4% “art work” fee which they claim is used to maintain signage designs (you still have to pay for all advertising media buys). The typical investment to open a store is between $120,000 and $180,000. That’s a lot of eBay sales ($6000,000 in sales would be needed to cover the high-end investment if you retain 30% of total sales as a selling fee).

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.
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