Franchise royalty fees vary from one franchisor to the next. They can be very simple or somewhat complex. To begin with, let’s examine why franchisors assess a franchise fee in the first place.

Franchisors are allowing you, the franchisee, to utilize their proven business model in order to successfully run your franchise. Franchisors will assess an upfront franchise fee to get you in the door and help you get your doors open for business. But this upfront fee basically covers their costs. It is not really a profit generator.

The primary source of revenue for a franchisor is the ongoing revenue generated from your business operations. In that regard, it is in the franchisor’s best interest to make sure that you are successful.

The best way to illustrate the different types of franchise fee arrangements is to give you some examples. Here are 5 franchise opportunities that I like:

As you can see, there is a lot of variation in how franchisors are rewarded. There is no right or wrong answer.