Written by Keith Gerson, CFE — President of Gerson Advisory Services
On June 28, 2023, FranConnect hosted the webinar Franchise Royalties Unleashed: Tools and Tactics for Growth. During the session, attendees participated in a pulse survey covering royalty rates, collection practices, technology, and payment methods.
Royalty Rate Ranges
The largest group of respondents, 42%, reported royalty rates between 6% and 8%. Another 39% fell in the 3% to 5% range, while smaller groups reported rates of 9% to 10% or above 10%.
In a separate FranConnect analysis of more than 2,200 Franchise Disclosure Documents, the average royalty fee across verticals was approximately 6% of monthly revenue. The analysis found that most franchise systems charged royalties as a percentage rather than a fixed dollar amount.
How Often Are Royalties Collected?
Survey respondents reported that 62% collected royalties monthly and 31% collected weekly. Panelists also described using ACH-based collection processes to reduce outstanding accounts receivable.
How Are Royalties Tracked?
When asked what they used to collect and track royalties:
- 36% reported using spreadsheets.
- 29% used royalty-management software.
- 12% relied primarily on invoicing.
- 14% selected another method.
How Are Royalty Payments Collected?
Seventy-seven percent of respondents said they used direct bank transfers such as EFT or ACH. Smaller groups used checks or bank drafts, automatic recurring payments, or online payment portals.
When asked about satisfaction with collection methods, 52% were satisfied while 48% were interested in an improved payment network.
The original article also highlighted FranConnect’s payment-network integration at the time, emphasizing faster settlements, payment-status visibility, multi-currency support, and reduced transaction friction.
Royalty Contributions Were Trending Up
Respondents also reported improving sales and royalty contributions in the first half of 2023 compared with the second half of 2022:
- 10% said royalties were significantly higher.
- 27% said moderately higher.
- 27% said slightly higher.
- 4% said they were unchanged.
- 12% said slightly lower.
- 2% said moderately lower.
Overall, 64% of respondents reported some level of increase.
Use Technology to Improve Royalty Management
The survey reinforced the value of moving away from fragmented spreadsheets and manual processes toward a system that connects sales reporting, royalty rules, invoicing, payment collection, reconciliation, and reporting.
The original webinar featured Mark Siebert of iFranchise Group, Sean Manning of Payroll Vault, and Peter Ross of Senior Helpers and Town Square.
