What Percentage Do Franchises Take? Royalty and Fee Structure in Franchising

The average starting royalty percentage in a franchise is 5 to 6 percent of volume. These fees range from a fraction of 1 to 50 percent or more of revenue, depending on the franchise and industry. A fixed sum royalty fee is an alternative.

In a franchise, the franchisor licenses their trademark and business model to a franchisee. The franchisee runs the business and pays fees and royalties to the franchisor. Royalties are ongoing payments made as a percentage of revenue, usually between 4 to 12 percent.

The initial franchise fee is a one-time, flat fee that generally ranges between $20,000 to $50,000. Franchises also take royalties and marketing fees that can extend from 2 to 15 percent of revenue. These fees are generally not refundable.

On average, franchisees make $80,000 annually before taxes and expenses. Profit depends on the industry, and owning a franchise requires time and effort, not providing purely passive income.