Royalties are one of the most discussed — and most misunderstood — parts of franchising. Prospective owners sometimes see them simply as a cost. Others accept them without asking what they buy. This article explains what royalties and related marketing fees are, what they typically fund, and how to evaluate them in any Franchise Disclosure Document.
Three fees, three purposes
Most franchise systems have three recurring fees tied to sales. Magical Waxing® uses this structure:
- Royalty: 6% of gross sales, weekly
- Brand fund: 2% of gross sales, weekly
- Local marketing: 4% of gross sales, monthly
They're often lumped together, but they do different jobs.
The royalty
The royalty is the ongoing fee for the right to use the franchisor's trademarks, system and know-how, and for access to ongoing support. Think of it as the continuing license for everything that makes the brand a brand.
What royalties typically support
- Operations support. Field guidance, troubleshooting, and best-practice sharing among owners.
- System development. Updating the service menu, protocols, training content and manuals.
- Ongoing training resources. Refreshers and new-service training as the menu evolves.
- Technology and vendor relationships. Negotiating with suppliers and maintaining approved systems.
- Brand protection. Maintaining and defending trademarks so the name stays valuable.
The FDD describes the franchisor's obligations, particularly in Item 11. Read it closely to understand what support is promised.
The brand fund
A brand fund pools contributions from studios to pay for marketing that benefits the whole system: brand creative, website, digital presence, social content and similar programs. Item 11 typically describes how the fund is administered and whether it's audited or reported.
Questions to ask about a brand fund
- Who decides how the fund is spent?
- Are reports available to franchisees?
- Do franchisor-owned locations contribute on the same basis?
- How does the fund support local markets?
Local marketing
Local marketing is a required spend in your own territory. It's money you direct, within brand guidelines, to reach clients near your studio: local digital ads, community events, partnerships and promotions. It is not paid to the franchisor; it's a commitment to market your business.
How to evaluate fees in any FDD
- Read Item 6. It lists other fees, including royalties and marketing contributions.
- Read Item 11. It lists what the franchisor must do before and after opening.
- Talk to owners. Use the Item 20 list. Ask what support actually feels like day to day.
- Look at the whole package. Fees are only meaningful in light of what you receive.
- Consult a franchise attorney and accountant. They'll help you understand obligations and model costs.
A note on earnings
You'll notice we don't connect fees to earnings here. That's deliberate. Any financial performance information a franchisor provides must appear in Item 19 of the FDD. If someone gives you earnings figures outside of Item 19, treat that as a red flag.
Fees in context at Magical Waxing®
The Magical Waxing® system has been developed since 2016 through company studios that have served 50,000+ clients. Owners receive foundational training at the Tucker, GA flagship studio, a menu of 60+ services and a product system built on 12 Italian hard wax varieties. The full fee schedule is on our salon franchise cost page.
The bottom line
Royalties pay for ongoing access to a brand and system; brand funds pay for collective marketing; local marketing builds your own territory. Understanding each helps you evaluate any franchise on its merits. Read the FDD, ask detailed questions and compare what you receive to what you pay.