Franchise fees vs royalties: what you pay and when
One cost is paid once, before you open. The other is paid every month for as long as you run the business. Buyers mix them up. Here is the difference, with the numbers from eight 2026 filings.
There are two kinds of money you send a franchisor. Up-front fees are paid once, before you open. Royalties are paid again and again, usually as a percent of your sales. The Franchise Disclosure Document (FDD) lists both. The cover page shows what you pay the franchisor to start. Item 6 shows what you pay it every month.
What you pay before you open
The cover page of every FDD says how much of your total start-up cost goes to the franchisor or its affiliates. This is more than the "franchise fee". It can include equipment, a grand-opening package, or training costs that the franchisor sells you. The rest of your cost goes to landlords, builders and other suppliers.
| Franchise | Paid to the franchisor or its affiliates before opening | FDD page |
|---|---|---|
| The Joint Chiropractic | $20,950 to $40,900 | Cover page |
| Goldfish Swim School | $50,000 to $52,500 | Cover page |
| Dogtopia | $77,975 to $130,210 | Cover page |
| Crumbl | $81,000 to $89,000 | Cover page |
| Mosquito Joe | $82,446 to $83,096 | Cover page |
| Scenthound | $86,049 to $96,169 | Cover page |
| Koala Insulation | $109,335 to $128,386 | Cover page |
Club Pilates is left out because we did not find the same cover-page line in its filing. A smaller up-front amount is not a cheaper franchise. Compare it with the total investment and the royalty below.
What you pay every month
A royalty is a share of your sales paid to the franchisor for the right to use the brand and system. It is due whether or not you make a profit. Most royalties are a flat percent of gross sales. Some have a monthly minimum, and some drop as your sales grow.
| Franchise | Royalty in the 2026 FDD | FDD page |
|---|---|---|
| Club Pilates | 8% of Gross Sales | p. 18 |
| Crumbl | 8% of gross sales | p. 16 |
| Dogtopia | 7% of Gross Sales | p. 8 |
| The Joint Chiropractic | The greater of 7% of Gross Sales or $700 per month | p. 13 |
| Koala Insulation | 6.5% on the first $1,000,000 of Gross Sales, 5% from $1,000,001 to $2,000,000, 4.5% from $2,000,001 to $3,000,000, and a lower rate above that | p. 19 |
| Goldfish Swim School | 6% of gross sales, with a monthly minimum that starts at $1,250 for the first 90 days and rises later | p. 8 |
| Scenthound | 6% of Gross Revenue | p. 8 |
| Mosquito Joe | 10% of Gross Sales up to $500,000, then 7% above $500,000 | p. 19 |
Mosquito Joe calls its royalty a "License Fee". The Joint's filing also describes a lower rate for clinics that open during 2025 only; read Item 6 of the current FDD for the rate that applies to a new buyer.
A simple way to compare them
Say a franchise makes $500,000 in sales in a year. At 6%, the royalty is $30,000. At 8%, it is $40,000. At Mosquito Joe's 10% rate on the first $500,000, it is $50,000. That is our own arithmetic, not a figure from a filing. The point: two points of royalty on a $500,000 business is $10,000 a year, every year.
A flat rate and a tiered rate are not the same. A flat 8% costs you the same share at $200,000 or at $2,000,000. A tiered rate such as Koala's starts higher and falls as you grow, so it hurts most while you are small. A minimum such as The Joint's $700 per month means you pay even in a slow month.
What to check in Item 6
- Is the royalty a percent of gross sales or of something else? Gross sales is before your costs. You pay on money you may never keep.
- Is there a monthly minimum? A minimum is owed even when sales are low.
- Does the rate step up, step down, or ramp? Ask what year you will pay the full rate, not only the starting rate.
- What other fees are in Item 6? Ad fund, technology and software fees are charged on top of the royalty. Add them all up.
- Can the franchisor raise any of them? Read the notes under the Item 6 table. Some fees are allowed to rise.
Then put the royalty next to the sales figures in Item 19. That tells you what is left for you. Our guide on how to read Item 19 shows how.
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