what is a royalty fee

A royalty fee is a legally binding payment made to an individual or company for the ongoing use of their assets, including copyrighted works, franchises, and natural resources. It is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues. In the context of franchising, a royalty fee is an ongoing payment made by the franchisee to the franchisor for the duration of the franchise agreement. It is usually calculated as a percentage of the franchisees gross sales, and it is intended to cover the costs associated with the ongoing support provided by the franchisor. Royalty fees are disclosed in Item 6 of the Franchise Disclosure Document (FDD), which details continuous and other occasional fees that the franchisee may be required to pay to the franchisor while operating the franchise.