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How to Determine Franchise Royalties

Setting the right percentage is a balancing act.

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When designing a franchise, it is tempting to set high royalties to generate maximum income from franchisees. However, setting royalties is a balancing act. You want a fair financial return, but if you set royalties too high, the financial burden may mean franchisees can't compete with other businesses. If that happens, you will wind up with less in the end.

Excerpted from Grow Your Business