How Do Franchisors Make Money? Royalties, Fees and Units in 26 Public 10-Ks

How do franchisors make money? 12 numbers from 26 annual reports

Each card comes from a US-listed franchisor’s own annual report on Form 10-K, pulled from SEC EDGAR on 2026-10-05. Revenue lines are company totals in US dollars (worldwide unless noted) for each company’s latest fiscal year.

1. 26 US-listed franchisors were compared using their latest 10-K filings (fiscal 2025 for most; fiscal 2026 for four companies with March or June year ends). Source: SEC EDGAR filings listed under References.
2. 23.5% is the median share of total revenue that came from the royalty line across the 26 companies in the latest fiscal year. Source: company 10-Ks, our calculation.
3. 24 of 26 companies took in less than half of total revenue as royalties in the latest fiscal year; only Winmark (88.7%) and The Joint Corp. (60.5%) were above half. Source: Winmark FY2025 10-K, The Joint Corp. FY2025 10-K.
4. 16 of 16 companies that report royalties and franchise fees on separate lines collected more in royalties than in initial and other franchise fees; the median fee share was 8.2%. Source: company 10-Ks, our calculation.
5. $10,442.0 million in rent from franchisees was McDonald’s largest revenue line in fiscal 2025, ahead of $6,018.0 million in royalties and $88.0 million in initial fees (worldwide). Source: McDonald’s FY2025 10-K.
6. $138.9 thousand in royalties per franchised McDonald’s restaurant in fiscal 2025 ($6,018.0 million over 43,317 franchised restaurants). Source: McDonald’s FY2025 10-K.
7. 33.1x is the gap between the highest royalty line per franchised unit (Marriott International, $435.0 thousand per property) and the lowest (RE/MAX Holdings, $13.1 thousand per office) in the latest fiscal year. Source: company 10-Ks, our calculation.
8. $68.5 thousand is the median royalty line per franchised restaurant across 12 restaurant franchisors; the hotel median is $202.9 thousand per property (4 companies). Source: company 10-Ks, our calculation.
9. 93.5% is the median franchised share of units across the 24 companies with a computable split, latest fiscal year. Source: company 10-Ks, our calculation.
10. 10 up, 8 down: change in franchised share at 22 companies between the 10-K four fiscal years earlier and the latest 10-K. Source: company 10-Ks, our calculation.
11. 6.69% of franchisee sales came back to Planet Fitness as royalties in fiscal 2025 ($314.6 million over $4.7 billion), close to its stated 7% rate and its reported 6.7% average. Source: Planet Fitness FY2025 10-K.
12. 78.4% of the sample’s combined royalty lines ($22,411.9 million) sat with five companies: McDonald’s, Yum! Brands, Marriott, Hilton and Restaurant Brands International. Source: company 10-Ks, our calculation.

Revenue mix: royalties are the core fee, not most of the revenue

Summary: Royalties are the main continuing fee across the sample, but they are rarely most of a public franchisor’s revenue. The median company booked 23.5% of total revenue on its royalty line in the latest fiscal year. The rest came from rent, advertising funds, supply chain and product sales to franchisees, and company-operated units.

McDonald’s earned $10,442.0 million in rent from franchisees in fiscal 2025, 38.8% of its $26,885.0 million total, against $6,018.0 million in royalties (McDonald’s FY2025 10-K). McDonald’s describes conventional franchisees as paying rent and royalties based upon a percent of sales, with minimum rent payments.

Domino’s Pizza booked 60.5% of fiscal 2025 revenue from supply chain sales and 20.6% from U.S. and international royalties and fees (Domino’s Pizza FY2025 10-K). Papa John’s showed the same pattern: 49.7% of revenue came from commissary and other sales, 9.3% from royalties and fees (Papa John’s FY2025 10-K).

Hotel franchisors gross up cost reimbursements. Marriott reported $19,204.0 million of cost reimbursement revenue in fiscal 2025, 73.3% of total revenue, while franchise fees were $3,325.0 million (Marriott International FY2025 10-K). Hilton’s reimbursements were 58.9% of revenue (Hilton Worldwide FY2025 10-K). Marriott describes these as reimbursements of costs it incurred on hotel owners’ behalf, so they inflate revenue without being a fee.

In 8 of the 26 companies, company-operated sales were the largest single revenue line, including Wendy’s (42.1%), Planet Fitness (41.2%), Valvoline (94.5%) and H&R Block (92.9%). Revenue mix therefore says as much about how many units a franchisor still runs as about its franchise terms.

Royalties vs initial franchise fees

Summary: Initial franchise fees are small next to royalties at every company that reports both lines.

Among the 16 companies with separate royalty and fee lines, the median company’s initial and other franchise fees were 8.2% of royalties plus those fees. McDonald’s recorded $88.0 million of initial fees against $6,018.0 million of royalties in fiscal 2025 (McDonald’s FY2025 10-K). Wingstop recorded $6.5 million of franchise fees against $292.5 million of royalty revenue (Wingstop FY2025 10-K).

The highest fee shares come from companies whose fee line holds recurring charges. Xponential Fitness’s other franchise fees ($62.6 million) include territory, technology and training fees (Xponential Fitness FY2025 10-K); RE/MAX’s ($105.9 million) are annual dues, broker fees and franchise sales (RE/MAX Holdings FY2025 10-K). Choice Hotels’ figure ($192.0 million) is franchise and management fees other than royalties (Choice Hotels FY2025 10-K).

Accounting also keeps the initial fee line small. Restaurant Brands International states that initial and renewal franchise fees are recognized straight-line over the term of the agreement, so a fee collected at signing is spread across the license term (Restaurant Brands International FY2025 10-K). The FASB practical expedient for pre-opening services in ASU 2021-02 (January 2021) is available only to franchisors that are not public business entities.

Royalty revenue per franchised unit by sector

Summary: Royalty revenue per franchised unit spans more than an order of magnitude across companies, and the size of the unit explains much of it.

Across the 26 companies, the royalty line divided by franchised units at fiscal year end ran from $13.1 thousand at RE/MAX Holdings (per office) to $435.0 thousand at Marriott International (per property), a 33.1x spread. Among restaurant companies that report royalties on their own line, the median was $81.0 thousand per franchised restaurant.

Sector medians differ less than individual companies: $68.5 thousand for 12 restaurant franchisors, $202.9 thousand for 4 hotel franchisors, $42.0 thousand for 5 fitness and personal service franchisors and $59.1 thousand for 5 other service and retail franchisors.

Hotel lines include licensing fees: Marriott said the increase in its franchise fees primarily reflected higher co-branded credit card and other brand-related fees (Marriott International FY2025 10-K). Read the hotel figures as fee revenue per affiliated property, not as a pure royalty. For fee rates that franchisees pay under their FDDs, see our franchise royalty rates report.

Asset-light models: how franchised are public franchisors?

Summary: Most public franchisors in the sample run fewer than one unit in ten themselves, but the share is not rising everywhere.

The median franchised share of units was 93.5% across 24 companies with a computable split, and 16 of the 24 were at least 90% franchised. Winmark states that it does not own or operate any corporate stores (Winmark FY2025 10-K). At the other end, H&R Block reported 6,802 company-owned and 1,814 franchise offices, a 21.1% franchised share (H&R Block FY2026 10-K), and Valvoline’s franchised share was 53.4% (Valvoline FY2025 10-K).

Hotel franchisors also manage hotels for owners. Marriott’s 9,805 properties at the end of 2025 included 7,644 franchised, licensed and other properties, 1,966 managed and 51 owned or leased (Marriott International FY2025 10-K).

Refranchising: four fiscal years of unit mix

Summary: Between the 10-K four fiscal years earlier and the latest 10-K, franchised share rose at 10 companies, fell at 8 and was flat at 4.

Refranchising, selling company units to franchisees, shows up in the filings: Papa John’s refranchised 85 North American restaurants in fiscal 2025 (Papa John’s FY2025 10-K); Yum! Brands reported 23 restaurants refranchised in 2025 (Yum! Brands FY2025 10-K); Planet Fitness refranchised 8 clubs (Planet Fitness FY2025 10-K). The Joint Corp. reports its corporate clinics as discontinued operations held for sale and states a plan to refranchise or sell its full portfolio of company-owned or managed clinics (The Joint Corp. FY2025 10-K).

Several of the largest drops followed acquisitions. Restaurant Brands International’s company restaurant sites went from 134 at the end of 2021 to 2,380 at the end of 2025, after acquisitions that included Carrols Restaurant Group on May 16, 2024; on January 30, 2026, after that year end, it closed a Burger King China joint venture in which a CPE fund owns approximately 83% (Restaurant Brands International FY2025 10-K). H&R Block said lower U.S. royalties were primarily driven by franchise acquisitions (H&R Block FY2026 10-K), and Regis’s FY2026 10-K refers to its Alline Acquisition (Regis Corporation FY2026 10-K). Jack in the Box’s base year predates its March 8, 2022 acquisition of Del Taco, so its change mixes two brands (Jack in the Box (incl. Del Taco) FY2025 10-K).

Franchisors refranchise to collect a royalty instead of running the unit. Yum! Brands states that its franchisees supply capital by purchasing or leasing the land, building, equipment and supplies (Yum! Brands FY2025 10-K). The filings also show the reverse move when a company buys units from franchisees. Our franchise industry growth report tracks the wider count of franchise establishments.

Implied royalty rates vs stated rates

Summary: Where companies disclose franchisee sales, royalty revenue divided by those sales lands close to the stated royalty rate.

Planet Fitness collected 6.69% of franchisee-owned club sales as royalties in fiscal 2025, against a current rate of 7% and a reported average of 6.7% (Planet Fitness FY2025 10-K). Jack in the Box (including Del Taco) collected 4.93% against a 5.0% standard rate (Jack in the Box (incl. Del Taco) FY2025 10-K). Xponential Fitness collected 7.45% of system-wide sales; its agreements set 7% to 8% and it says it receives about 7% (Xponential Fitness FY2025 10-K).

Dine Brands’ 3.97% sits between Applebee’s 4% and IHOP’s 4.5% standard rates (Dine Brands FY2025 10-K). McDonald’s royalties were 4.64% of franchised sales, before rent (McDonald’s FY2025 10-K). Choice Hotels reported a 5.14% average U.S. royalty rate for 2025 (Choice Hotels FY2025 10-K); Wyndham reported 4.76% for the United States (Wyndham Hotels & Resorts FY2025 10-K).

Implied rates fall below stated rates when franchisees pay older, lower contract rates (about 63% of Planet Fitness clubs paid the current rate at the end of 2025), receive incentives (Domino’s says it collects lower rates in certain instances), or when the sales base includes items that carry no royalty (Planet Fitness FY2025 10-K; Domino’s Pizza FY2025 10-K). European Wax Center charges 6.0% of sales net of retail products, so its 5.53% on all system sales is expected to be lower (European Wax Center FY2025 10-K).

How concentrated is royalty revenue?

Summary: A few very large systems hold most of the royalty dollars in the public sample.

The 26 royalty lines summed to $22,411.9 million for the latest fiscal years. McDonald’s alone held 26.9%, and the five largest (McDonald’s, Yum! Brands, Marriott, Hilton and Restaurant Brands International) held 78.4%. Three of those five report royalty lines that include fees, rent or licensing income, so the share partly reflects what each company puts in the line.

Limits of public-company data

Summary: Public filings are audited and dated, but they cover a few large franchisors with uneven definitions.

• The sample is 26 US-listed companies. FTC staff estimated approximately 4,000 sellers of franchises covered by the Franchise Rule in a May 5, 2026 notice (91 FR, FR Doc. 2026-08686); private franchisors file no 10-K.
• Royalty lines differ: some companies combine royalties with initial fees, rent or licensing income (basis column in the company table).
• Unit counts are fiscal year-end counts and use each company’s own unit (restaurants, hotels, clubs, offices). Per-unit figures use year-end units, not averages.
• Franchisee sales are company-reported, unaudited key metrics. Fiscal years differ: most end in December 2025, but H&R Block, Regis, Nathan’s Famous and Rave end in 2026.
• Company-level revenue says nothing about any franchisee’s results. For unit-level financial performance representations, read Item 19 of a brand’s Franchise Disclosure Document; our buying a franchise guide explains where to find it, and franchise costs and funding covers what opening a unit costs.