Common Myths and Misconceptions About Franchise Fees and Royalties

Franchising remains one of the most popular ways for entrepreneurs in the UK to start a business with the support of an established brand. Yet franchise fees and royalties are often misunderstood, which can make the decision to join a network feel more confusing than it needs to be.

By clearing up the most common misconceptions, new franchisees can make informed decisions with confidence.

What Are Franchise Fees and Royalties?

Franchise fees are one-time payments made when a new franchisee joins a network. This fee grants the right to operate under the brand and access training, onboarding, and initial support.

Royalties are ongoing payments, usually charged as a percentage of gross sales. These fees cover the continuous support offered by the franchisor, including marketing guidance, operational assistance, brand development and system improvements.

Both fees sit at the core of franchising. They ensure consistency across the network and help maintain the strength and reputation of the brand.

Common Franchise Fees and Royalties Myths

Here are a few common myths about franchise fees and royalties we will debunk today. We hope this will help you get into the business with a clearer mind.

1. It Is Always Too Expensive to Join a Franchise

Many people assume that all franchises require very high investment. In reality, franchise opportunities exist across a wide range of budgets. Some require modest start-up costs, while others involve larger investments due to brand strength, location needs or equipment requirements.

Prospective franchisees can choose a brand that fits their budget and growth ambitions.

2. Franchisors Only Care About Money

Franchisors earn royalties when franchisees perform well, so both parties share the same goal. Strong networks invest heavily in training, support, marketing and innovation because the franchisee’s success strengthens the entire brand.

A healthy franchise relationship is based on collaboration, not competition.

3. Franchise Fees Are Unnecessary or Unfair

Franchise fees are not arbitrary charges. They fund initial training, onboarding, manuals, territory assessments, launch support and access to the brand. These benefits are detailed in the franchise agreement, giving full transparency before anything is signed.

Franchisees always know what they are paying for before they commit.

4. Franchise Fees Are Overpriced

Some believe franchise fees are inflated. In reality, fees are calculated based on clear factors such as brand value, training requirements, operational systems and the investment the franchisor has made in developing the model.

Most franchise fees represent only a small portion of the total investment, and in many cases, the long-term value gained through training, support and brand recognition outweighs the initial cost.

5. Royalties Are a Waste of Money

Royalties are one of the biggest sources of support franchisees receive. They help fund:

• Ongoing training
• National marketing and advertising
• Product and service development
• Operational support and business coaching
• Brand improvements and innovation

Royalties give franchisees access to resources and expertise that would otherwise be costly to obtain independently.

6. Franchise Fees and Royalties Are the Same Thing

This is a common misconception. They are two entirely different payments with different purposes.

• Franchise fee: A one-off payment made at the beginning.
• Royalty: A recurring payment, usually based on gross sales, made throughout the franchise agreement.

Both contribute to maintaining the strength and consistency of the franchise network.

How Franchise Fees and Royalties Work in Practice

When joining a franchise, the initial fee varies depending on the brand, sector and scale of operations. Larger and more established brands with nationwide visibility often charge higher fees, while smaller or emerging brands may be more affordable.

Royalty fees typically range between 5% and 10%of gross sales. Some networks use a fixed percentage, while others use a sliding scale that adjusts as revenue changes. The structure is always explained in advance so franchisees can plan accordingly.

Royalty fees reflect ongoing network costs such as training, field support, marketing, supply chain management and system improvements.

The Truth About Franchise Fees and Royalties

Choosing the right franchise involves understanding the full financial model and the value behind each fee. When franchisees know what they are paying for and how the fees benefit them, the partnership becomes stronger and more transparent.

With the right network, fee structure and level of support, franchising offers a clear path to launching and growing a successful business backed by a trusted brand.