TL;DR
The Small Business Administration explains that franchise royalties are collected by franchisors on a monthly basis, based on a percentage of revenue, typically ranging from 4-12%. Franchise fees, which grant access to a franchisor's business model, usually range from $20,000 to $50,000.
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.
In this story
This story was originally published in 1851 Franchise on April 8, 2022. Burnaze summarizes and links to the original reporting.
Read the full story at 1851 FranchiseLiked this? Get the week's franchise news, explained
- Sunday 8 AM ET weekly + a monthly deep dive
- Sections picked for the industries you follow
- Every claim linked to its source. Free.