Mike AndesFounder, Augusta Lawn Care and Homeworks · Founder of Homeworks and Augusta Lawn Care

Royalties vs. Flat Fees 📋 Franchise Business Strategy 🤔 💼

4 Dec 2025 · 1 min

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0:37

Transcript of a conversation (YouTube) about franchise pricing strategy comparing percentage royalties versus fixed flat fees. Speakers cite a $35,000 franchise startup fee, discussion of a royalty (mentions of 3% and 4%), and a previously-used $1,200/month flat fee. The dialogue calculates that at 3% royalties a franchisee must sell $36,000/month (≈$430,000/year) for royalties to exceed $1,200/month and discusses incentive effects and franchisee attitudes toward marketing charges.

Questions this video answers

$35,000

$1,200 per month

$36,000 per month

About $430,000 per year

Both 4% (Speaker B: 'we make up... a 4%') and 3% (others and Mike Andes' calculations) are mentioned.

When we sign up a new franchisee, how much are we earning per franchisee?
So the franchise startup fee is 35k. The franchisees, they start up, almost all of them do at least six figures right off the first year, and they seem to get to 150, 200K, you know, shortly after that. So we make up, you know, a 4%, we call it royalty on the gross revenue of all the franchisees.
Have you ever considered doing a flat fee instead of the 3%?
Yes, because you do it.
It is much more appealing to an entrepreneur to say, hey, I'm charging a flat dollar amount no matter how much you sell. It incentivizes them to grow the business. Because right now, the reason that they all hate his marketing budget thing is because they know every time they market and they get a lead and they get a sold job, he gets a cut.
Ours when we started was $1,200 a month. At 3%, we have to, they have to sell $36,000 a month in fence to get $1,200 in royalties. And so if we multiply by 12, this is the part that's the kicker. They have to do over $430,000 in annual revenue to make more on 3% than 1,200 DOL. More importantly, our revenue gets flattened for the whole year because you get your monthly fee no matter what.
It's up to you to grow. You pay the same amount no matter what. Now when I tell you to do something in your business, you believe I have your best interest at heart because I make the same amount no matter how successful you are.