What are royalties in franchise?

Each franchise has its own franchise royalty fees, and they vary from industry to industry. Royalties are fees that are meant to cover items such as operating manuals, ongoing support, and additional resources that may be needed by the franchisee.

Royalty fees are usually calculated as a percentage of the weekly or monthly gross sales, and they are paid weekly, monthly, or quarterly depending on the franchise agreement. Some of the standard royalty fees include:

• Fixed costs - a set amount paid by the franchisee on a weekly, monthly, annual, or one-time basis
• Percentage of revenue - a charge based on a percentage of income during a particular period
• Rate per item or transaction - a charge based on a percentage of individual transactions
• Split profit royalties - not very common, these fees mean the total profits of a particular location during a set period are split between the franchisee and the franchisor at an agreed percentage