Royalties, marketing levies & the fees nobody explains properly
6% of gross revenue sounds small — until you model it against your margins, not your turnover. Here's how the full fee stack actually works, and the pressure-test I run before any buyer signs a ten-year agreement.
The Short Answer
Royalties typically run 4% to 9% of gross revenue — charged whether you're profitable that month or not — and marketing levies add another 1% to 4%, ring-fenced in a separate account you're entitled to see. Add technology, renewal, transfer and refurbishment fees, and the real ongoing "franchise tax" on revenue often lands between 6% and 15%. Model every fee against your gross margin, not your turnover, and get the fee schedule plus the last audited marketing fund statement in writing before you sign anything.
What a royalty fee actually buys you
A royalty is a recurring payment — usually monthly, usually 4% to 9% of gross revenue — for the ongoing right to run the brand and the system behind it. It is not a one-off toll. It's rent, paid every month, for as long as you operate.
Here's the brutal fact most buyers skip past: a royalty is calculated on revenue, not profit. Open the doors, do the trade, and the royalty is due — whether the month made you money or not. That's not a trick clause. It's how every franchise system on earth is built. But if you walk in assuming it only bites when you're winning, you've mispriced the deal before you've signed it.
The useful question isn't "is 6% a lot?" It's Kiyosaki's question in different clothes: is this fee renting you an asset — a system that's actively building the value of what you own — or is it renting you a logo while you do all the building yourself? Ask what specifically renews for you each month: product development, national marketing reach, a call centre, supplier leverage, a support team who answers the phone. A franchisor who can list it in one breath is showing you a system worth the rent. One who reaches for "brand equity" and stops there hasn't finished the sentence.
The marketing levy — and the audit trail most buyers never ask for
A marketing levy is a separate contribution, typically 1% to 4% of gross revenue, pooled into a collective fund for brand-wide advertising. Under the Franchising Code, that fund has to sit in its own account, with financial statements prepared — and you're entitled to ask for them.
Say this plainly, because nobody in a sales pitch will: a marketing levy you can't see the statements for isn't a marketing budget. It's a discretionary fund with your name on the invoice and someone else's hand on the spend. That's not cynicism — it's just what "trust me" looks like on a balance sheet, and you wouldn't accept it from anyone else holding your money.
The fix costs you nothing and takes one email. Before you sign, ask for the last twelve months of marketing fund statements. A franchisor with a well-run fund will have that document ready before you finish the sentence. One who stalls, deflects, or tells you it's "being finalised" has just given you the most useful piece of due diligence in the entire process — for free.
The fee stack nobody puts in the pitch deck
Royalty and marketing levy are the two fees everyone mentions. They're rarely the only two you'll pay. Here's the full stack, and what to ask about each one.
Indicative structures commonly seen across Australian franchise systems in 2026 — not a quote for any specific brand. Every system's fee stack is set out, in full, in that franchisor's disclosure document.
"What exactly does this fee pay for?" isn't a hostile question. It's the only question. A franchisor who answers it in one breath is showing you a mature system. One who changes the subject has already answered it.
Why "% of revenue" is the most dangerous number in franchising
Percentages feel small in isolation. They stop feeling small the moment you run them against your actual margin instead of your turnover — and that one shift in arithmetic is where a lot of franchise buyers get hurt.
Do the maths before you fall for the brand, not after. A 6% royalty plus a 2% marketing levy is 8% of gross revenue. On a business running a 15% net margin, that's more than half your margin gone before rent, wages, stock and everything else. On a business running a 35% margin, the same 8% is a rounding error. Same fee stack. Same percentage. Wildly different reality — and the difference is entirely the margin of the business underneath it, not the fairness of the fee.
This is where certainty matters more than optimism. Don't buy a brand because the story is good and hope the margin works itself out. Get the category's typical margin from your accountant, run the full fee stack against it, and know — with numbers, not vibes — whether the business can carry what you're about to sign up for. That's not pessimism. That's the difference between owning an asset and renting yourself a very expensive job.
The four-question pressure test I run before anyone signs
These aren't gotcha questions. They're the questions a serious operator expects, answers without flinching, and is quietly glad you asked — and the questions a shaky one hopes you never think of.
"What exactly does my royalty pay for, month to month?" — not the marketing-brochure answer, the operational one: who picks up the phone, what gets built, what changes because you pay it.
"How is the marketing fund audited, and can I see the last statement?" — asked plainly, and asked before you're emotionally committed to the brand, not after.
"What fees exist beyond royalty and marketing that didn't make today's conversation?" — technology, renewal, transfer, refurbishment. Make them say the number out loud.
"What happens — precisely — if I want to sell, or don't want to renew?" — get the mechanics, not the reassurance.
How they answer tells you more than what they answer. A franchisor who slows down, gets specific and hands you documentation is showing you exactly how they'll behave for the next ten years. One who gets vague, warm and reassuring instead of specific is also showing you exactly how they'll behave for the next ten years.
What the Code actually forces them to show you
Australia's Franchising Code of Conduct requires every franchisor to give you a Key Facts Sheet, a full Disclosure Document and the proposed Franchise Agreement before you sign anything. Fees have to be fixed, disclosed and reasonable — and the marketing fund specifically has to sit in a separate account with financial statements prepared.
Here's the brutal fact to sit with, Collins-style: the Code protects you on paper. It does not protect you from not reading the paper. I've watched buyers treat the disclosure document as a formality to sign around, not the single most useful document in the entire transaction. It isn't. It's where every fee this article describes in ranges becomes a specific number, for a specific brand, in writing.
My own rule, every time, no exceptions: disclosure document in hand, full fee stack modelled against the category's real margins with your own accountant, agreement reviewed by a franchise lawyer who's never met the franchisor, and franchisee references you choose yourself — not the three names they hand you. If you want the philosophical case for why royalties can be a shortcut worth buying rather than a tax to resent, I've made it in the royalty reframe. This article is the practical version: the fee-by-fee breakdown to run before you sign anything.
If You Remember Nothing Else
- Royalties are charged on revenue, not profit — you pay them in a loss month too.
- A marketing levy without an audited statement you're allowed to see isn't a marketing budget.
- The fee stack is bigger than royalty plus marketing — technology, renewal, transfer and refurbishment fees are real and often under-disclosed.
- Model every fee against your gross margin, not your turnover. The same 8% means something completely different at 15% margin versus 35%.
- Ask for the fee schedule and the last 12 months of audited marketing fund statements, in writing, before you sign anything.
Questions buyers ask me
Real questions from real discovery calls — answered the way I'd answer them on the phone.
Rarely, and that's not automatically a bad sign — consistent royalty pricing across a network usually means discipline, not inflexibility. Where there's genuinely room to move is what you get for the fee: training depth, support cadence, territory protection. Ask about those before you ask for a discount on the percentage.
Most networks sit between 1% and 4% of gross revenue. The percentage matters less than the paperwork behind it — ask to see how it's actually been spent over the last year before you decide whether it's fair.
No — and this is where buyers get it backwards. A 4% royalty on a system with weak support can cost you more in lost sales than an 8% royalty on a system that actively drives revenue. Model the fee against what you're actually getting, not the headline number.
Ask specifically about technology or system fees, renewal fees, transfer fees, and any refurbishment or brand-standard upgrade obligations — these rarely make the pitch deck but they're all in the disclosure document.
You should be able to, and you should ask before you sign, not after. The Franchising Code requires the fund to sit in a separate account with financial statements prepared — request the most recent one as a standard part of due diligence.
This lives in the agreement, not the pitch — get your franchise lawyer to walk you through default, exit and transfer provisions before you sign, not when you need them.
Want a second set of eyes on a fee schedule?
Send through the disclosure document and I'll tell you straight whether the numbers stack up against the margin — including if they don't.