Starting a franchise business does not guarantee instant success. As a potential franchisee, you need to fully understand that you don’t just pay the fee and get started. There is still plenty to understand including the terminology used in the franchising industry, the initial franchise fee, and the ongoing royalty fee.
The franchise fee upfront covers the initial training, license to use trademark and business systems and to sell the products under the franchise. The royalty fee on the other hand is designed to compensate the franchiser for the ongoing use of the brand, its property, as well as the copyrighted works over the life of the agreement.
While it appears to be confusing, it’s important to know the two most likely types of royalty fees that you will encounter: the fixed and percentage royalty fees. To help you start, here’s an infographic from Business Franchise Australia, a bi-monthly publication offering the latest news, expert advice, and franchise information from across Australia and New Zealand, that explains the differences between fixed and . percentage royalty fees.