Franchise Royalty

A franchise royalty is the ongoing fee a franchisee pays to the franchisor, typically calculated as a percentage of gross revenue. Disclosed in Item 6 of the FDD, royalties are the primary recurring revenue stream for franchisors and are usually paid weekly or monthly. Royalty rates in the franchise industry typically range from 4% to 12% of gross revenue, with an industry average around 6-7%. Some franchisors use flat-fee royalty structures instead of percentages, and others may have tiered systems that decrease as revenue increases. Royalties fund the franchisor's ongoing support, brand development, and corporate operations.