How do royalties work in franchising?

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royalties in franchising

Royalties in franchising are a central element of the business model and can be defined in different ways. Generally, they are calculated as a percentage of the affiliated point of sale's turnover or as a fixed fee . These payment methods are agreed between the franchisor and the franchisee and help define the type of relationship between the two parties. Let's now look in detail at the main methods of royalty payment and their implications.

Payment Methods for Royalties
There are two ways to pay royalties engineer data in franchising:

Royalty as a percentage of turnover : the compensation is directly proportional to the economic success of the franchisee, incentivizing the franchisor to actively support him.
Fixed royalty fee : The franchisee pays a fixed fee regardless of the turnover generated, which can represent greater pressure for the affiliate, especially in the first few months of business.