Franchise royalty and fees, explained
Brands quote a franchise fee. What decides whether an outlet is worth owning is everything charged after it — royalty, marketing levy, supply margin, technology and renewal. This page names each charge, gives the ranges seen in India, and shows how to add them into one monthly number you can compare across brands.
Every charge in a franchise agreement
| Charge | Typical in India | What to check |
|---|---|---|
| Franchise fee | One time, ₹1–25 lakh | Paid on signing for brand rights, initial training and launch support. Usually non-refundable and rarely creditable against anything else. |
| Royalty | Monthly, 3–10% of net sales | The recurring price of the licence. Check whether it is on gross or net sales and whether there is a monthly minimum that applies even in a bad month. |
| Marketing or brand fund | Monthly, 1–3% of sales | A pooled national spend. Ask for last year's statement, and whether you must also spend a set amount locally. |
| Supply margin | Built into purchase price | Where compulsory supplies come from the brand, the margin is a fee by another name. Compare the brand's price to the open market on your top five inputs. |
| Technology or software fee | Monthly, ₹2,000–25,000 | POS, inventory and reporting systems. Often fixed per outlet, so it hurts proportionally more at low volume. |
| Renewal fee | At term end, 25–100% of the original fee | Charged to extend the agreement. A five-year term with an expensive renewal is a different deal from a ten-year term. |
| Transfer fee | On sale, ₹1–10 lakh or a % of sale value | Payable if you sell the outlet. Also check whether the brand has a right of first refusal on the sale. |
Ranges describe the Indian market generally and exist so you can sanity-check an offer. Individual listings on this site show only the figures the brand itself published.
Turning the rates into one monthly number
Take a realistic monthly sales figure — not the brand's projection, but the number you would still hit in a slow month. Apply the royalty and marketing percentages to it, add the fixed technology fee, then add the supply margin: the difference between the brand's price and the market price on the inputs you are obliged to buy.
On ₹6,00,000 of monthly sales, a 6% royalty and a 2% marketing levy is ₹48,000. A ₹8,000 software fee makes ₹56,000. If compulsory supplies cost 8% more than the market on ₹2,00,000 of purchases, that is another ₹16,000 — ₹72,000 a month, or 12% of sales, against a headline royalty of 6%.
Do the same arithmetic across the brands you are comparing and the ranking usually changes. A brand with a higher royalty and no supply obligation is frequently cheaper than one advertising a waived fee.
Questions to put in writing
- Is royalty calculated on gross or net sales, and how is net defined?
- Is there a minimum monthly royalty regardless of sales?
- Which supplies must be bought from the brand, and at what price list?
- What did the marketing fund spend in my region last year?
- What is the term, the renewal fee, and on what grounds can renewal be refused?
- What happens to fees if the brand opens another outlet inside my territory?
- What is payable if I want to sell the outlet?
Franchise royalty and fees: common questions
+What is franchise royalty?
A recurring payment to the brand for the right to keep trading under its name and systems, usually charged monthly as a percentage of net sales. It is separate from the one-time franchise fee you pay to join.
+What is a typical franchise royalty rate in India?
Most brands charge between 3% and 10% of net sales. Food and retail commonly sit at 4–8%, services at 6–10%, and education often charges per student per year instead of a percentage. Some brands charge no royalty at all and take their margin on compulsory supplies instead.
+Is royalty charged on gross or net sales?
It should be defined in the agreement. Net sales normally means gross sales less GST, discounts and refunds. If the agreement says gross, you may be paying royalty on tax you have already handed to the government — get the definition in writing.
+What is the difference between the franchise fee and royalty?
The franchise fee is a one-time joining payment covering brand rights, initial training and setup support. Royalty is the ongoing monthly payment for the term of the agreement. A low fee with a high royalty can cost far more over five years than the reverse.
+Do I have to pay a marketing fee as well?
Often yes — typically 1–3% of sales into a national or regional brand fund, on top of royalty. Ask what the fund was spent on last year and whether local marketing is your own additional cost.
+Can franchise royalty be negotiated?
Established brands rarely move the rate, but newer ones often will, and most brands will discuss a lower or waived royalty for the first six to twelve months while the outlet ramps. Reductions in supply pricing or territory size are usually easier to win than a rate cut.