Franchise Royalty Fees: What to Expect by Industry
Royalties are the largest ongoing cost of franchise ownership. Here is what franchisees pay across industries, with data from 5,700+ brands.
How Royalties Work
A royalty fee is an ongoing payment from the franchisee to the franchisor, usually calculated as a percentage of gross revenue. It is paid weekly or monthly, regardless of whether the location is profitable.
Average Royalty Rates by Industry
| Industry | Average Royalty | Typical Range |
|---|---|---|
| Fast food / QSR | 5.5% | 4% to 6% |
| Full-service restaurant | 4.5% | 3% to 6% |
| Fitness / gym | 5.5% | 4% to 8% |
| Beauty / salon | 6.0% | 4% to 8% |
| Home services / cleaning | 7.0% | 5% to 10% |
| Auto repair | 5.5% | 4% to 7% |
| Real estate / brokerage | 6.0% | 5% to 7% |
| Education / tutoring | 7.0% | 5% to 10% |
| Hotel / lodging | 5.0% | 4% to 6% |
| Retail | 5.0% | 3% to 7% |
Royalty Structures
**Percentage of Gross Revenue:** The most common structure. Calculated on total sales before any expenses. A $1M/year location at 6% royalty pays $60,000/year.
**Flat Fee:** Some brands charge a fixed monthly or weekly amount regardless of revenue. Easier to budget but can be painful during slow months.
**Sliding Scale:** Royalty rate decreases as revenue increases. Rewards high-performing locations.
**Zero Royalty (Fee-Only):** Rare, but some brands charge no ongoing royalties. They make money through product markups or technology fees instead.
The True Royalty Burden
Royalties alone do not tell the whole story. The total franchise cost burden typically includes:
- Royalty fee: 4% to 8%
- Marketing fund: 2% to 6%
- Technology fees: 0.5% to 2%
- **Total: 6.5% to 16% of gross revenue**
On a $1M/year location, that is $65,000 to $160,000 per year going to the franchisor before you pay for rent, labor, food, or insurance.
Last updated: April 2026