Franchise News
What is a Franchise Royalty Fee?
There are several fees associated with opening a franchise, and they can be confusing. A franchise royalty fee is a monthly fee based on revenue and is paid in addition to the upfront franchise fee.
When you open a franchise, you pay a franchise fee. This is an upfront cost that will give you access to a franchisor’s business model. According to the Small Business Administration, a franchise fee is a license to own and operate a franchise business.
Franchisors charge a franchise fee that typically ranges from $20,000 to $50,000, but in some cases can run as high as $100,000.
There are also “other” franchise fees that include marketing fees and royalties.
The Small Business Administration stated that franchise royalties are collected by the franchisor on a monthly basis, and are based on a percentage of revenue. Franchise royalties range from 4% up to 12% or more. The actual percentage depends on the type of franchise you are opening.
According to the Small Business Administration, a food franchise often has a lower franchise royalty fee than other types of franchises due to the high volume of revenue.
Related articles:
Don’t Miss the Next Big Franchise Story
Sign up for the 1851 Franchise newsletter to get our biggest stories before everyone else
By signing up, you agree to our user agreement (including class action waiver and arbitration provisions), and acknowledge our privacy policy.
