Every franchise comes with two kinds of payment to the franchisor. The franchise fee is paid once, when you sign, and buys the right to open under the brand. The royalty is paid every week or month for as long as you own the business, and over the life of an agreement it is almost always the larger of the two. Buyers tend to compare fees because they come first; the royalty is the number that shapes the business for the next ten or twenty years.
Among the well-known brands here, the typical franchise fee is $40,000 and the typical royalty is 6% of gross sales. Most brands add a marketing fund contribution of about 2.5%, so roughly 9% of every dollar a location takes in goes back to the franchisor and its advertising.
What the franchise fee buys
The fee pays for the license to use the name, the operating manual, initial training and help choosing and opening a site. It is part of the total cost to open, usually about a tenth of it, not an extra on top. Many brands discount it for veterans, for a second location or for smaller formats such as kiosks and non-traditional sites. McDonald’s charges $45,000 for a traditional restaurant, and Jimmy John’s $35,000, half that at a non-traditional location.
Fees climb where the franchisor hands over something large, such as an exclusive territory with a big population or an expensive opening package. Servpro’s $100K fee comes with a required equipment and products package on top.
Lowest franchise fees
- Domino'sUp to $10K
- Kumon$2K
- H&R Block$3K
- Ace Hardware$5K
- Papa Johns$5K–$25K
Highest franchise fees
- Kiddie Academy$150K
- The Goddard School$135K
- Lawn Doctor$115K–$118K
- Servpro$100K
- Urban Air Adventure Park$100K
A low fee is not the same as a cheap franchise: some of the lowest fees belong to brands that cost hundreds of thousands to open.
How royalties work
Most royalties are a fixed percentage of gross sales, the money coming in before rent, wages or food costs. That makes them simple to calculate and hard to avoid: you pay the same share in a record month and in a month when the business loses money. 6% is the single most common rate, charged by 58 brands here.
The highest percentages belong to Jackson Hewitt (15%), Liberty Tax (14%), Sylvan Learning (11%), Lawn Doctor (10%), Mathnasium (10%) and Mosquito Joe (10%). Tax preparation, tutoring and lawn-care brands charge the most.
Another 28 brands use a sliding or tiered rate instead of one number: a lower percentage in the first year, a rate that falls as sales rise, or different rates for different kinds of work. Their pages show the exact steps. When you compare, work out what you would pay at the sales you expect rather than comparing headline rates; the cost calculator does this for any brand. You can also use the finder to see franchises with a royalty of 5% or less.
Royalties that aren’t a percentage of sales
A minority of brands charge in other ways. A flat fee rewards an owner who grows sales, because the franchisor’s cut stays the same; a share of profit means the franchisor only earns when the location does. Some brands take nothing on sales at all and make their money on the products owners buy from them.
A flat fee each month or year
- Anytime Fitness: A flat monthly fee, currently $842 per center, adjusted each January for inflation. The franchisor can replace it with a royalty of up to 8% of gross revenue.
- HOTWORX: A flat royalty of $695 a month per studio.
- Kona Ice: A flat yearly royalty: $3,000 in years one and two, $4,000 in years three to six and $5,000 in years seven to ten, paid in summer installments.
- Mac Tools: No percentage royalty; an annual fee of $1,200, with inventory bought from Mac Tools.
- Roto-Rooter: A monthly franchise fee from $280 to more than $36,000, set by a population formula and adjusted each year.
- Snap Fitness: A flat royalty of $725 a month, plus $0.73 a month per enrolled member, adjusted yearly for inflation.
A fee per student or agent
- Kumon: A monthly fee per enrolled student: $38 per full-paying student and $19 per partially paying student once the temporary license period ends ($42.75 and $21.38 during it), plus $30 for each new enrollment.
- RE/MAX: A continuing franchise fee of $143 to $170 a month per sales associate, depending on the state, rising each July.
A share of profit or margin
- Brightway Insurance: Brightway keeps 20% of commissions on new business and 50% on renewals; the agency owner keeps the rest.
- Chick-fil-A: A base operating service fee of 15% of gross receipts (less the equipment rental and business services fees), plus an additional operating service fee of 50% of the restaurant's net receipts.
- Christian Brothers Automotive: 50% of monthly split profits, paid monthly.
- Express Employment Professionals: Express keeps 40% of the gross margin on temporary staffing and remits 60% to the franchisee each month.
- Goosehead Insurance: 20% of gross revenues on new insurance policies and 50% on renewals, with a minimum royalty.
A markup on products you buy
- Jet's Pizza: 12% of the food and supplies a store buys (its acquired inventory), with a minimum of $1,200 a month, rather than a share of sales.
- Maui Wowi: No percentage royalty. A fee of 15% of the purchase price is added to Maui Wowi products, supplies and equipment.
No royalty
- Ace Hardware: No royalty is listed. Members pay bi-weekly statements for merchandise, freight and program fees.
- The Human Bean: No royalty. The franchisor earns from the coffee and supplies franchisees buy from it or its designated suppliers.
The marketing fund
On top of the royalty, most franchisors collect a contribution to a brand fund that pays for national advertising, the website, apps and promotions. The typical rate is 2.5% of sales; 36 brands here don’t list one. Some brands also require you to spend a set amount on local advertising in your own area or to pay into a regional co-op. Subway, for example, charges a 8% royalty and 4.5% for advertising, 12.5% of sales in all.
What it adds up to
That money comes out before the owner is paid, so it belongs in any estimate of what a location can earn. Add it to the rent, payroll and loan payments when you work out how much a franchise needs to sell to support you.
Typical fee and royalty by industry
Middle values for each industry. A brand can sit in more than one industry, such as pizza and fast food.
| Industry | Fee | Royalty |
|---|---|---|
| Auto repair | $42K | 6% |
| Bakery | $43K | 6% |
| Burger | $40K | 4.8% |
| Chicken | $40K | 5% |
| Cleaning | $40K | 7% |
| Coffee | $38K | 6% |
| Commercial cleaning | $40K | Varies |
| Daycare | $108K | 7% |
| Education | $46K | 10% |
| Entertainment | $55K | 6% |
| Fast food | $35K | 5% |
| Fitness | $51K | 7% |
| Food | $35K | 5.5% |
| Gym | $40K | 6% |
| Handyman | $67K | 6% |
| Home care | $55K | 5% |
| Ice cream | $35K | 6% |
| Lawn care | $49K | 8.5% |
| Massage | $44K | 6% |
| Oil change | $37K | 6% |
| Pet | $50K | 6% |
| Pizza | $25K | 5.3% |
| Plumbing | $43K | 6% |
| Printing | $44K | 5.5% |
| Real estate | $23K | 6% |
| Restaurant | $35K | 5% |
| Restoration | $60K | 5.5% |
| Retail | $30K | 5% |
| Salon | $48K | 6% |
| Smoothie | $35K | 6% |
| Spa | $47K | 6% |
| Sports | $50K | 7% |
| Tax | $25K | 14.5% |
| Trampoline park | $75K | 6% |
Other fees to ask about
The royalty and marketing fund are the big recurring charges, but rarely the only ones. Many franchisors charge a monthly technology fee for point-of-sale, scheduling or booking software. Training for new managers after opening may cost extra. Renewing the agreement when the first term ends usually carries a fee, and so does selling the business to a new owner. Some brands require you to buy food, equipment or supplies from them or from approved suppliers, which can matter as much as any fee. Each brand page spells out its royalty and marketing fund; ask the franchisor for the full list of everything else before you sign.
Questions
What is a typical franchise royalty?
6% of sales is the most common rate, charged by 58 of the brands here, and the median is 6%. Most brands also take 2.5% or so for a marketing fund, so 9% of sales in total is typical.
Is the royalty charged on sales or profit?
Almost always on gross sales: the money coming in before any costs. That means you pay it in months when the business loses money. A few franchisors take a share of profit or margin instead, or charge a flat monthly fee.
Which franchises charge no royalty?
Ace Hardware and The Human Bean charge no royalty on sales; they earn from the products and supplies owners buy instead. Jet's Pizza and Maui Wowi likewise charge on what you buy rather than what you sell.
How much royalty will I pay a year?
Multiply your expected yearly sales by the royalty and marketing fund rates. At $500,000 in sales, 9% comes to $45,000 a year. The cost calculator does this for any brand.