A Royalty is a payment made by one party, the licensee or franchisee, to another party, the licensor or franchisor for the right of ongoing use of their asset (equipment, branding, intellectual property, etc.). Royalties are typically agreed to be a percentage of gross or net revenues derived from the use of an asset or product.

Some standard franchising royalties are as follows:

  • Royalty Fee: A generic fee that covers the costs of value provided by the franchisor to their franchisees

  • Marketing Fee: Covers the percentage of investment the franchisor makes to promote the brand across all manner of media platforms

  • Sales Fee: Standard fee that applies a percentage either to specific products/services that the franchisor provides, or all products/services that the franchisee sells

  • Technology Fee: Typically a lower percentage of sales, meant to cover the ongoing support and technological solution that the franchisor provides to each franchisee. 

There are specific overrides and exemptions that can be made, as well as specific inclusions to a rate for different products. It will depend on the structure of your organization how it is set up.

For a walkthrough on how to create your royalties click here.

To learn how to run a report that shows you all of your royalties, click here.

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