Who typically receives royalties in a franchise arrangement?

Who typically receives royalties in a franchise arrangement?

• A. Franchisee
• B. Franchisor
• C. Supplier
• D. Customer

Answer: (B)

Royalties come from the franchisee to the party that owns and provides the business model, brand, and ongoing support. In a franchise setup, the franchisor grants the right to operate under its system, so it collects these ongoing payments as compensation for that access. The franchisee pays the royalties to the franchisor, typically as a percentage of sales or a regular fee, which funds brand maintenance, training, and support. It isn’t paid to suppliers or customers, and the recipient isn’t the franchisee. That’s why the franchisor is the one that typically receives royalties.

Royalties come from the franchisee to the party that owns and provides the business model, brand, and ongoing support. In a franchise setup, the franchisor grants the right to operate under its system, so it collects these ongoing payments as compensation for that access. The franchisee pays the royalties to the franchisor, typically as a percentage of sales or a regular fee, which funds brand maintenance, training, and support. It isn’t paid to suppliers or customers, and the recipient isn’t the franchisee. That’s why the franchisor is the one that typically receives royalties.