Franchisee in 2026: entry fee, royalties and accounting

Quick answer. A franchisee's entry fee is, as a rule, an intangible asset (account 205) depreciated over the contract term; periodic royalties are operating expenses (account 6511). Both carry the standard 20% VAT, recoverable by a VAT-registered franchisee. Before signing, the franchisor must hand over a pre-contract disclosure document at least 20 days in advance (Doubin law, article L330-3 of the French Commercial Code).

Joining a franchise network means buying access: to a brand, know-how and support. In return, the franchisee pays an entry fee, then royalties. These flows have a precise accounting and tax treatment that is often misunderstood at the outset. The franchisee also remains an independent trader: they run their own business, hire staff and bear their own risk.

Recently, a founder opening a branded outlet consulted us: he had expensed his entire entry fee in the first year, crushing his result and distorting his financial image with the bank. We restored the correct treatment. Here are the rules to know before signing.

The principle: an intangible asset#

The entry fee (or initial lump-sum fee) pays for lasting access to the network: the right to use the brand, the sign and the know-how. When it provides an economic benefit over several years and is an identifiable item, it meets the definition of an asset. It is then recorded as an intangible asset in account 205 "Concessions and similar rights", then depreciated over the likely term of the franchise contract (often 5, 7 or 9 years).

This follows from the distinction between assets and expenses (administrative guidance, BOFiP BOI-BIC-CHG-20-10-20): a cost that creates an identifiable, lasting asset is not an expense of the year.

The "services" portion may be an expense#

The entry fee sometimes funds individualised services: initial training, help choosing the location, opening assistance. Where the contract values these immediately-consumed services separately, that portion may be expensed. Failing a contractual split, the whole amount is capitalised and depreciated.

Table: entry fee and royalties#

The franchisee then pays periodic royalties: the operating royalty (often a percentage of turnover) and the advertising royalty, which funds the network's communication. These are operating expenses, recorded in account 6511 "Royalties for concessions, patents, licences, trademarks, processes, software, rights and similar items". They are fully deductible from the result of the year to which they relate.

The entry fee and royalties carry the standard 20% VAT rate. A VAT-registered franchisee recovers this input VAT, provided the franchisor's invoices are compliant. On a capitalised entry fee, the VAT is deductible immediately: it does not follow the depreciation schedule.

Accounting unfolds in three steps:

1. On signing: the entry fee net of VAT is capitalised in account 205, the VAT is recorded as deductible input VAT, and the payable (or payment) to the franchisor is recognised.
2. At each year-end: a depreciation charge (account 6811) is recorded over the contract term.
3. At each royalty due date: the royalty is recorded as an expense (6511) with the corresponding deductible VAT.

Before signing, the franchisor has a disclosure obligation. The Doubin law of 31 December 1989 (article L330-3 of the Commercial Code) requires a pre-contract disclosure document (DIP) to be handed over at least 20 days before signing the contract or paying any sum. Its content is set by article R330-1: presentation of the network, general and local market conditions, the franchisor's accounts, term and renewal conditions.

This 20-day period is a safeguard: it gives the candidate time to analyse the network, check projected profitability and seek advice. An incomplete or late DIP can be grounds to annul the franchise contract.

Fit-out, opening inventory and lease premium#

Beyond the entry fee, the franchisee often bears the outlet fit-out (depreciated tangible assets), an opening inventory sometimes imposed by the brand, and, when taking over premises, a possible lease premium (a non-depreciable intangible asset). These items shape the initial financing need, to be weighed against the choice to take over a business or start fresh.

Financing the entry fee#

The entry fee can be financed by personal funds or a loan. It stays capitalised on the balance sheet; loan interest is a deductible financial expense. A franchised start-up should be prepared with a solid forecast.

Micro-enterprise#

A franchisee can in theory fall under the micro regime, but rarely: the initial investment and network obligations sit poorly with the micro regime's ultra-simplified bookkeeping. The VAT base exemption also forgoes recovering VAT on the entry fee and fit-out.

• Do not expense the entry fee in full in the first year: it is depreciated over the contract term.
• Keep the DIP and proof it was provided at least 20 days before signing.
• Check deductibility and VAT recovery on each royalty (compliant invoices).
• Separate the "services" portion (expense) from the "network access" portion (asset) where the contract splits them.
• Anticipate the fate of the entry fee at contract end: the residual net book value if it is not renewed.

The most common pitfall for a new franchisee is confusing cash and result. The entry fee leaves the cash account at once, but it is not a one-off expense: it is the purchase of an asset that will serve for several years. Expensing it entirely in year one crushes the result, distorts the ratios shown to the bank and deprives the business of a true and fair view.

Conversely, properly capitalised and depreciated, the entry fee spreads the charge over the contract term and reflects economic reality. At Hayot Expertise, from opening we set up bookkeeping that clearly separates assets (entry fee, fit-out) from recurring expenses (royalties), with a tool such as Pennylane. It is also an asset with the franchisor, who values a rigorous franchisee.

Hayot Expertise advice. Before signing, have your accountant review the DIP and the contract: contract term (which sets the entry-fee depreciation), the royalty base, and renewal and exit clauses. Build a forecast that capitalises the entry fee and spreads its depreciation: your early-year results will be fairer and your bank file stronger.