We're your best review guide

Advantages and disadvantages of royalty for owner and buyer

Advantages and disadvantages of royalty for owner and buyer Johannes Röll Visitors: 381 ★★★★


Advantages and disadvantages of royalty for owner and buyer

Regular payments that are paid to the owner of intellectual property or natural resources for their use in commerce are called royalty. Translated “royalty” is state or royal. Initially, such a payment was allocated to the state for the development of mineral resources. Currently, this term mainly refers to regular payments for a franchise (purchase of the right to use the brand name, its technologies and business plan).


As a rule, these contributions are paid every month until the 11th day. Payment for the use of copyright may occur for each subsequent publication without a fixed schedule.


Types of Royalty

The amount of royalties depends on the level of profit received by the franchise buyer. There are several options for calculating payments:

1. Percentage of all sales.

2. Percentage of margin (difference between price and cost).

3. A fixed amount.

4. Combined contributions.


The amount of royalties depends on the popularity of the brand and the size of the city in which the business is located. In small cities, as a rule, the size of payments is lower, since it is more difficult to earn income in them. On average, royalties are 5–13%. For example, at McDonald's, monthly contributions are 12.5%, and in the CFS - 11%. There are franchises that do not include royalties. They are usually suppliers of products for sale and benefit from the sale of their goods. There are times when the franchise owner hides royalties, laying them in the price of the supplied goods.


Advantages and disadvantages of royalties

For the franchise owner (franchisor), royalties are a very favorable condition of the contract, because he receives a constant passive income. As for the buyer of franchising (franchisees), then for him such contributions are fixed costs. However, the payer of contributions receives a guarantee of quality assistance of the franchisor in business, as the owner of the brand will be interested in the development of the project. An exception is a contract with a fixed amount of contributions. The franchisor offering these conditions will not care if the business of its buyer is developing or not. In addition, the franchisee will have to pay a set amount of royalties, even if he does not have any income.


There are times when a payer of royalties does not receive the expected return. For example, a brand may not have the declared value, or the franchisor may not provide the promised assistance. Thus, the franchisee is wasting his money. Before signing a contract, the buyer should carefully study all the conditions associated with royalties, and calculate the possible costs and planned profits.

In a franchise business, the phrase “lump-sum installment” is often heard. This is also payment for using the brand, but unlike royalties, it is paid once.


Johannes Röll
Johannes Röll

Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer

Comments 0

Recent Projects

Advantages and disadvantages of royalty for owner and buyer

Tax havens for Forex trading: how to legally save on taxes

In this article we take a look at some of the low tax countries that may be of interest to those looking for ways to reduce their tax liability by trading Forex.

Advantages and disadvantages of royalty for owner and buyer

Forex trading and commodities trading: Forex or commodities?

This article discusses the main differences between commodities trading and Forex trading, as well as factors to consider when choosing a market to trade.

Advantages and disadvantages of royalty for owner and buyer

Are Renko charts profitable?

Renko charts are a type of technical analysis chart that is used by traders to chart price movements in various markets, focusing on price movements.

Advantages and disadvantages of royalty for owner and buyer

Information sources for investment education

First, you must decide how much time, effort and money you are willing to invest in learning and investing. The more active you trade, the more knowledge and skills you will need.

Advantages and disadvantages of royalty for owner and buyer

Introduction to Weekend Forex Trading

If you are interested in the Forex market and are already familiar with the concept of exit trades, you are probably wondering how they work and how to respond to them. There is no denying that exit trades present unique opportunities and risks for traders. In this article, we will look at how Forex trading works over the weekend and what strategies can help you meet this challenge.

Advantages and disadvantages of royalty for owner and buyer

Investments and stocks: how to choose the right one and make money in the market?

Investments and stocks are one of the most popular ways for many people to make money. But how do you choose the right stocks and invest in them to maximize your profits? In this article, we'll tell you how to choose the best stocks and how to properly invest in them.