Royalty Fees

Royalty fees are ongoing payments made by the franchisee to the franchisor, usually calculated as a percentage of the franchisee’s gross sales. These fees are a primary revenue stream for franchisors and typically cover the costs of ongoing support, brand development, and national marketing. The royalty fee is usually specified in the franchise agreement and can range from 4% to 10% of gross sales, depending on the franchise system. Franchisees should understand the royalty structure and how it affects profitability when evaluating a franchise opportunity.