Franchise Glossary
Royalty Fee
The ongoing periodic payment a franchisee makes to the franchisor, typically calculated as a percentage of gross sales.
Royalty fees are the franchisor's primary ongoing revenue source and fund the support, training, and infrastructure the franchisor provides. Royalties are typically 4–8% of gross sales, paid weekly or monthly. Some franchisors charge a flat monthly fee instead of a percentage. It's important to understand that royalties are based on gross sales, not profit, so they must be paid regardless of whether the unit is profitable. Royalty obligations are detailed in Item 6 of the FDD.
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