{
  "slug": "franchise-royalty-impact",
  "title": "Franchise Royalty Impact Calculator",
  "heading": "Franchise Royalty Fee Impact Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/franchise-royalty-impact",
  "summary": "See how royalty and marketing fund fees eat into franchise unit profit.",
  "description": "Home service franchises (cleaning, lawn care, junk removal) typically charge 5-8% royalty plus 1-3% marketing fund fees on gross revenue, taken off the top before any expenses are covered. This calculator shows exactly how much of a franchise unit's revenue disappears to fees and what net margin looks like after royalties are layered on top of normal operating costs.",
  "formula": "Royalty fee = revenue × royalty %. Marketing fee = revenue × marketing %. Net margin = (revenue − operating costs − royalty − marketing) ÷ revenue.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=franchise-royalty-impact",
  "inputs": [
    {
      "id": "revenue",
      "label": "Monthly gross revenue",
      "kind": "number",
      "hint": null,
      "default": 45000,
      "unit": "$",
      "min": 1000,
      "max": null
    },
    {
      "id": "royaltyPct",
      "label": "Royalty fee",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": "%",
      "min": 0,
      "max": 15
    },
    {
      "id": "marketingPct",
      "label": "Marketing/ad fund fee",
      "kind": "number",
      "hint": null,
      "default": 2,
      "unit": "%",
      "min": 0,
      "max": 10
    },
    {
      "id": "operatingCostPct",
      "label": "Operating costs (labor, supplies, vehicles)",
      "kind": "number",
      "hint": null,
      "default": 60,
      "unit": "%",
      "min": 0,
      "max": 100
    }
  ],
  "outputs": [
    {
      "id": "totalFees",
      "label": "Total monthly franchise fees",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "royalty",
      "label": "Royalty fee",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "marketing",
      "label": "Marketing fund fee",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "netProfit",
      "label": "Net monthly profit",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "netMargin",
      "label": "Net margin",
      "format": "percent",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Monthly gross revenue: 45000 $",
      "Royalty fee: 7 %",
      "Marketing/ad fund fee: 2 %",
      "Operating costs (labor, supplies, vehicles): 60 %"
    ],
    "outputs": [
      "Total monthly franchise fees: $4,050",
      "Royalty fee: $3,150",
      "Marketing fund fee: $900",
      "Net monthly profit: $13,950",
      "Net margin: 31.0%"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter monthly gross revenue ($).",
      "Enter royalty fee (%).",
      "Enter marketing/ad fund fee (%).",
      "Enter operating costs (labor, supplies, vehicles) (%).",
      "Read your total monthly franchise fees on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "revenue": 27000,
        "royaltyPct": 4.2,
        "marketingPct": 1.2,
        "operatingCostPct": 36
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "revenue": 45000,
        "royaltyPct": 7,
        "marketingPct": 2,
        "operatingCostPct": 60
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "revenue": 72000,
        "royaltyPct": 11.200000000000001,
        "marketingPct": 3.2,
        "operatingCostPct": 96
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why are royalties charged on gross revenue instead of profit?",
      "a": "Franchisors charge on gross revenue because it's simple to verify and can't be manipulated by how a franchisee reports expenses. The downside for the operator is that royalty is owed even in a low-margin month, so a home service franchise with thin operating margins can find royalty fees consuming a disproportionate share of actual profit compared to a franchisee with better cost control."
    },
    {
      "q": "What royalty rate is typical for home service franchises?",
      "a": "Cleaning, lawn care, and junk removal franchises commonly charge 5-8% royalty plus 1-2% into a national marketing fund, for a combined 6-10% off the top of gross revenue. Some newer franchise models use tiered or flat-fee royalty structures instead, which can favor higher-revenue units."
    },
    {
      "q": "How much revenue growth is needed to offset a royalty increase?",
      "a": "If royalty rises from 6% to 8% on $45,000 monthly revenue, that's an extra $900 a month, roughly $10,800 a year, coming straight off the top. To offset that purely through growth at a typical 15% operating margin, the unit needs about $7,200 in additional monthly revenue just to break even on the fee increase."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/crew-hour-job-pricing",
    "https://www.revenuelab.fyi/toolbox/quote-close-rate-revenue"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Franchise Royalty Impact Calculator (https://www.revenuelab.fyi/toolbox/franchise-royalty-impact)"
}