Royalty fee is the amount of money a franchisee pays to the franchisor so that he or she can use the ideas, expertise and processes in of franchisor to improve the business. The fee is calculated as a percentage of net sales and be paid weekly, monthly or quarterly. Royalty fee is used to maintain the relationship between the franchisee and franchisor. The royalty fee is paid to advertise and market franchisee’s business. The payments are also used to pay expenses such rent and compensating employees. The fee is used to expand and extend the business. The advertisements costs are paid by this fee. This enables the business to earn more profits. Royalty fee covers the training and support given to franchisee. If the franchise is declared bankrupt, the franchisee should not pay royalty fee. He or she may decide to move out of the business or take full control of the business. The franchisee is coaxed to visit attorney who may give him or her advice when such a thing occurs. The franchisee and franchisor should agree on the payment of the fee before signing the contract. Profits made are used to determine the royalty fee. When the profit is high, franchisor take large amount of money. During low sales, the franchisee, the royalty is less. In some cases, royalty fee may be fixed. This will enable franchisee and franchisor to know the amount of fee to be paid. In times of low sale, Franchisee will still pay the fixed fee. During high sale he or she will earn more profits. Royalty fee is non-refundable. After franchisee has made payment, he or she is not refunded no matter what happens. It may only be refundable if franchiser and franchisee agreed before signing the contract. Generally, royalty fee covers the following: Training offered to franchisee Advertising, promoting and marketing of franchisee’s business Advice given to franchisee on how to run the business The cost of using franchisor’s ideas, expertise and trade mark Royalty fee should be calculated and recorded in books for easy reference. This will give details of how the money is spent. The fee is used for initial investment and licensing of the franchise. The fee is used to run the business until profits are made. The fee should be balanced so that both franchisor and franchisee benefit. If the fee is high, the franchisee is likely to make less profit. If the fee is too low, the franchisor suffers. For the agreement to satisfy both parties, royalty fee should be balanced.