The Royalty Under the Royalty

What 698 Franchise Disclosure Documents say about the minimum royalty, the fee most prospective franchisees never price.

By FDD Evaluation · Figures as of October 25, 2026

The fee under the fee

Of 698 Franchise Disclosure Documents read by FDD Evaluation, 267 set a minimum royalty: a fixed dollar amount the franchisee owes every year whether or not the headline percentage would reach it. That is 38% of the documents, and 63% of the home-services ones. The percentage is what the sales conversation quotes. The floor is what a slow unit pays.

Where the document prices the floor, it is typically $7,200 a year, and it becomes the real royalty for any unit grossing less than about $120,000. For a mature unit that is a backstop. For a unit in its first year, a small territory, or a system whose own Item 19 average sits near the line, it is the rate. In one system in this corpus the floor turns a 7% royalty into 12.9% of what the average reporting unit actually sells.

How a floor works

A royalty is almost always written as a percentage of gross sales, paid monthly or weekly. A floor adds one clause: the franchisee pays the percentage or a fixed amount, whichever is greater. Item 6 of the FDD lists it, usually as a note under the royalty row, and the franchise agreement in the exhibits repeats it.

Take a 6% royalty with a $7,200 floor, the typical pair in this corpus. A unit grossing $200,000 pays 6%, which is $12,000; the floor never comes into it. A unit grossing $80,000 would owe $4,800 at 6%, but pays $7,200, which is 9% of its sales. The break-even is the floor divided by the rate: $7,200 at 6% is $120,000. Below that revenue the headline percentage is not the royalty, and the shortfall falls hardest on the units least able to carry it.

Some agreements defer the floor for the first year or two, so a new unit pays only the percentage while it ramps. Eight documents here do that, all at $6,000 a year. The rest apply it from opening.

How common floors are

The floor is a sector habit, not a franchising habit. It is near-universal in the businesses sold on a protected territory and a recurring service, home services and senior care above all, and almost unknown in restaurants, where a unit’s rent and build-out already commit the franchisee and sales rarely fall low enough for a floor to matter.

The systems that set a floor are, on the whole, the cheaper ones to enter. The low end of the Item 7 investment range runs a median of $142,000 where there is a floor against $231,000 where there is not, and the headline royalty is a touch higher, 6.5% against 6%. A floor is how a franchisor underwrites a small, inexpensive territory: the fee a unit must pay stays worth collecting even when the unit stays small.

How big the floors are

Of the 267 documents that set a floor, 71 state it as a figure the reader can annualise. The rest describe a minimum the way a lawyer does: a monthly amount that changes by year of the term, a sum tied to the territory’s population, or a reference to a schedule in the agreement. Those 196 are counted as floors here and priced as nothing, which is the honest reading of a number the document declines to state plainly.

Among the 71 priced floors the middle is $7,200 a year, the middle half runs from $6,000 to $13,000, and the range is $2,400 to $39,000. Nineteen of them are exactly $6,000, which is $500 a month, the round figure a franchise lawyer reaches for. Seven are $24,000 a year or more: 1 Tom Plumber at $39,000, Budget Blinds and F45 Training at $30,000, Medi-Weightloss at $27,000, Gold’s Gym, Junk King and ProColor Collision at $24,000.

The figure that matters to a buyer is not the floor but the revenue at which it stops being the royalty. Dividing each floor by its headline rate gives that break-even. The middle is $120,000 of annual sales, the middle half runs from $87,000 to $217,000, and three systems set it above $500,000. Below the line the percentage on the brochure is not the rate on the invoice.

When the floor is the real rate

Eighteen of the priced floors sit in documents whose Item 19 also states an average annual revenue per unit, so the two can be put side by side. In sixteen of them the average unit clears the break-even with room to spare and the headline rate is the rate. In two it does not.

Budget Blinds is the instructive case. Its 3.5% is among the lowest royalties in the corpus, and the $30,000 floor is among the highest. The two meet at $857,143 of annual sales, and the average reporting franchisee sells $774,915, so the average unit pays the floor and its royalty is 3.9%, not 3.5%. Live 2B Healthy, a mobile senior-fitness concept with small units, sets a modest $6,000 floor against a 7% rate; its average reporting unit sells $46,533, and pays 12.9%. F45 Training’s average unit clears its $428,571 break-even by 12%, which leaves a good share of its units below it.

Two cautions apply to every row. An Item 19 average describes the units the franchisor chose to report on, under definitions it set. And in most systems the average sits well above the median, pulled up by the best units, so more franchisees sit under the break-even than the average suggests.

Three patterns worth knowing

One platform, one clause. The eight deferred floors in the corpus are all $6,000 a year, and seven of the eight brands, Blingle!, Bumble Bee Blinds, Gatsby Glass, Groovy Hues, Mighty Dog Roofing, Stand Strong Fencing and Varsity Zone, are home-services concepts launched by a single franchise platform. Their agreements were plainly drafted from one template. A buyer comparing two of them is comparing the same clause twice, and a buyer who negotiates it in one has a precedent for the others.

Royalties that step down. Thirteen documents lower the percentage as a unit’s sales grow, typically by half a point or a point above a sales threshold. A floor and a step-down in the same agreement bracket the franchisee: more of the royalty at the bottom, less of it at the top.

Royalties that are not percentages at all. Thirty documents charge a flat fee instead: $2,900 a month, $695 a month, $300 a week rising to $500 after the first year, or a schedule that climbs through the first year of the term. A flat fee is a floor with no ceiling. It is the right structure for a franchisee who expects to outgrow it quickly and the wrong one for everybody else, and it cannot be compared with a percentage without the Item 19 figure to divide it by.

What to do with this

The floor is in every FDD that has one, and it takes two minutes to price. Find the royalty row in Item 6 and read its notes to the end; the minimum, if there is one, is there or in the franchise agreement the row points to. Divide the annual floor by the headline rate. That is the revenue below which the percentage on the brochure is not the royalty.

Then put that number next to Item 19. If the franchisor discloses an average or a median unit revenue, ask how many reporting units fell below your break-even in the latest year, and ask the franchisees on the Item 20 list the same question. If there is no Item 19, the floor is the only royalty figure in the document you can rely on, and your first-year plan should carry it as a fixed cost.

Three questions for the franchisor, in writing:

1. Is the minimum royalty deferred during the ramp, and for how long?
2. Has the minimum been waived or reduced for any franchisee in the last three years, and on what terms?
3. Does the minimum rise with the term or with the consumer price index, and where does the agreement say so?

The franchise pages on this site show the royalty, the floor and the investment range for every document already read, and the Full FDD Evaluation reads them from the FDD you upload.

Method and caveats

The corpus is the 698 Franchise Disclosure Documents FDD Evaluation has read and published a page for, as of October 25, 2026: 676 are 2026 editions, 19 are 2025, and three are older. It is weighted toward home services, which is 171 of the documents, and it is not a random sample of the roughly 4,000 franchise systems registered in the United States. The shares above describe this corpus, not the industry.

Every figure was read from the document’s own text by the same readers that grade an uploaded FDD, with no model involved for these fields: the royalty and its minimum from Item 6 and its notes, the investment range from Item 7, the average revenue from Item 19. A floor was counted when the document states a minimum royalty in any form, and priced only when the reader could annualise it as a single figure. The 196 floors counted but not priced are a limit of the reading, not a finding about the documents; a minimum stated per month, per territory or by year of the term is still a minimum.

The Item 19 comparison covers only the 18 systems where both a priced floor and an average unit revenue were read, and an average is the franchisor’s chosen statistic over the franchisor’s chosen units. Break-even revenue is the floor divided by the headline percentage and ignores the local advertising, technology and other fixed fees that Item 6 lists beside the royalty, all of which make a slow unit’s position worse than the royalty alone suggests.

This is an analytical reading of disclosure documents. It is not legal, financial or tax advice, it does not predict profitability, and a franchisor named here has done nothing but write down what its agreement requires, which is what the FDD is for.