Royalty
The ongoing percentage of sales (or other fee) a franchisee pays the franchisor for the brand and system.
Last updated September 5, 2026
Royalties are typically a percentage of gross sales, sometimes with a minimum, plus a separate advertising or brand-fund contribution. They reduce the cash flow a buyer can use for debt service and owner pay, so they belong in the earning model, not only in a footnote. Rates and what “sales” includes are defined in the franchise agreement. Non-franchise licenses or area-development fees are different contracts.