Your royalty structure is one of the most important decisions you will make as a franchisor. Set it too high and franchisees struggle to profit. Set it too low and your corporate team cannot fund the support network that drives system-wide success.
The best royalty structures are designed with both parties in mind, creating alignment between franchisee profitability and franchisor sustainability.
Fixed vs. Percentage Royalties
Most franchise systems use a percentage-based royalty, typically ranging from 4% to 8% of gross revenue. Some brands opt for fixed monthly fees, which can be simpler but may not scale as well with location performance.
Marketing Fund Contributions
In addition to royalties, most systems include a marketing or brand fund contribution, usually 1% to 3% of gross revenue. These funds support national marketing efforts, brand development, and lead generation.
