Is this how the Kukkiwon and WTF work? I heard that the testing fees for black belts cost an arm and a leg.
No, this is not how the Kukkiwon and WTF work.
The Kukkiwon establishes minimum test requirements and establishes what techniques and hyung/poomsae/forms are a part of Kukki taekwondo. Anyone can use and teach the techniques and forms. If you want to be a registered Kukkiwon yudanja, then you must meet the minimum requirements set by the Kukkiwon, which includes knowing Taegeuk Poomsae iljang through paljang.
The individual school is free to make additional requirements. Any Kukkiwon Yudanja of fourth dan and higher may sign dan certificates. One can only promote to two dans beneath their own. Thus a fourth dan cannot furnish a student a Kukkiwon certificate higher than second dan.
The WTF regulates sport taekwondo and has nothing whatsoever to do with ranks. One does not have membership in the WTF. One has membership in the national affiliate, which in the United States, is USAT.
There is no franchise with the KKW/WTF. If you want your student to be Kukki Certified, send in the student's paperwork and the registration fee of 120.00 and sign off on the student being proficient in the minimum requirements and the Kukkiwon will furnish you with 14x8 certificate in your student's name with you as the certifying master.
It should be noted that schools often charge over and above the Kukkiwon registration fee of 120.00. That gold stitched belt is not free after all, nor is the master's time. Some charge a
lot more and do nothing more than conduct a test and send in paperwork. Others charge a
lot more, but give you lots of cool stuff to go with your certificate (our school does this, furnishing a high end dobok, gold stitched belt, and other miscellany). Some charge just enough over to cover the cost of the test (the masters' time, cost of a rented facility in some cases).
If you do not care about Kukki certification and just want to teach taekwondo, then you are more than welcome to teach taegeuk forms and the body of techniques used in Kukki taekwondo, plus whatever else you would like. Your students' rank will simply not be recognized by the Kukkiwon.
Sorry for the lengthy answer!
Daniel