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What is A Continuing Royalty Payment?


Well, that's the money that you're going to pay the franchisor for being able to use their system and being part of that brand. Typically, these days it's often a weekly payment and they often auto draft that payment for your convenience. It may be more their convenience, but that's an expense that you're going to have. It comes off the front top line of your profit and loss statement. They're going to get their money, no matter what. It's up to you to make sure that you have some money left at the bottom of the profit and loss statement in terms of profit. I urge everybody when they look at their FDDs to examine all the costs they'll have ongoing. There are numerous costs throughout the FDD, including advertising, which is a large one. But there're also a lot of miscellaneous charges, things that are $80 a month, a hundred dollars, a hundred dollars there, and I would ask people to recognize those costs. Take a sheet of paper and as you're going through the FDD, add up all the miscellaneous charges. Be very clear on what you're paying a franchisor.

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