Franchise Royalty Fee Calculator

About this calculator

Most franchise agreements charge two ongoing fees calculated as a percentage of gross sales, not net profit: a royalty fee, typically 4–8%, paid to the franchisor for the right to use the brand and system, and a marketing or ad-fund fee, typically 1–3%, pooled across franchisees to pay for national or regional advertising. Both are deducted before the franchisee's own operating costs — rent, labor, cost of goods — come out.

Prospective franchisees run this calculation while comparing franchise disclosure documents (FDDs) from different brands, because a lower up-front franchise fee can be offset by a higher ongoing royalty rate, and the combined percentage taken off gross sales directly determines how much margin is left for the franchisee to cover costs and take home as profit.

This calculator takes your projected gross sales, royalty rate and ad-fund rate and returns the dollar amount owed for each fee and the revenue remaining after both are deducted, so you can compare franchise opportunities on an apples-to-apples basis.