Do franchises have to pay royalties to the franchisor?

• A. Yes
• B. No
• C. Sometimes
• D. Only if territory

Answer: (A)

Royalties are ongoing fees charged by the franchisor to the franchisee for using the brand and the business system. They cover access to the brand, training, ongoing support, marketing programs, and the use of proprietary systems. In most franchise agreements, paying a royalty is required, typically as a percentage of gross sales or a regular fixed amount. This obligation is tied to the advantage of operating under the franchise, not to a specific territory, so it applies across the board. While some agreements might tweak how royalties are calculated or bundled with other fees, the standard setup is that royalties must be paid. So the answer is that franchising usually requires royalties.