Royalties are a special type of royalties, expressed in periodic compensation, and usually in monetary form. Payment goes for the right to use various items protected by patents or copyright, as well as for profit from existing franchises, when extracting natural resources, and so on. There are several options for paying royalties - as a percentage of the total cost of goods or services sold, profits or income, or in the form of a fixed fee that does not change regardless of the firm's performance. The concept of royalty is most widely used in franchising. In this type of relationship, compensation is charged for the fact that a person has the right to use a trademark, slogans, logos, music and other trademarks that identify a certain company from among many. Thus, a company operating under someone else's franchise is able to attract additional customers without the need for cash investments to create and develop its own brand.
Depending on the concluded agreement, the company will pay royalties according to one of three existing and widespread schemes:
Turnover percentage. In this case, the money is deducted in favor of the franchisor from the total turnover of the enterprise for the agreed time period, in the amount of the percentage established in the contract.
Interest on margin. With this calculation scheme, money is paid depending on the difference between the retail price and the price set for bulk purchases.
Fixed royalty. In this case, the closest analogy is rent. The royalty is in the form of a regular payment, and the total amount is tied to the existing cost of the franchisor's services, the area of the buildings available in the asset, the total number of operating enterprises, as well as the number of clients served.
More here - https://en.wikipedia.org/wiki/Royalty_payment
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