What franchise royalty means
Royalty is the ongoing payment a franchisee makes to the franchisor for continued use of the brand, systems and support. It is separate from the one-time franchise fee paid at the start.
How royalty is charged
Brands usually charge a percentage of monthly sales or a fixed monthly amount. Some add a separate marketing or brand-fund contribution. The rate and basis vary widely from brand to brand and sector to sector.
What to check before signing
Ask whether royalty applies to gross or net sales, whether there is a minimum monthly payment, when it is due, what penalties apply and whether it changes at renewal. Royalty is a service payment, so GST generally applies.
This guide is general information, not legal or tax advice. Check current rules with a qualified professional.