How are franchise royalties and fees calculated?

Franchise royalties and fees are calculated based on the terms of the franchise agreement. The agreement typically outlines a percentage of the gross or net sales of the franchise, which the franchisor must pay to the franchisee. In Washington, the franchisor must also provide the franchisee with a royalty statement each year, along with the amount of royalties and fees paid to the franchisor. The royalty rate may also be determined on a sliding scale, depending on the total sales of the franchise. When the franchise has been in operation for a certain amount of time, or produces an agreed upon amount of income, the royalty rate may be lowered. This helps to encourage further involvement from the franchisee and can be beneficial to both the franchisor and the franchisee. Fees may also be required in the franchise agreement, such as a franchise fee, which is usually a fixed amount paid when the agreement is executed. Additional fees may include marketing fees, advertising fees, legal fees, and training fees. All fees should be included in the franchise agreement and be agreed upon by both parties before the agreement is signed. The franchise agreement should also include terms regarding how the franchise is operated, as well as dispute resolution procedures. These are important aspects of any franchise agreement in Washington, as they ensure that the franchisee has the rights and protections they need.

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How are franchise royalties and fees calculated?

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