A royalty is usually a percentage of sales or a fixed amount paid by the owner to the franchisor on a regular schedule. It is the most visible number in a franchise, and the one each seat reads most differently.
From the franchisor's seat
Royalties are how a franchisor funds the system: field support, training, technology, brand standards and the staff behind them. A franchisor that prices royalties too low can end up unable to support owners; one that prices them too high makes owners' economics harder. Either way, the royalty is the franchisor's core revenue.
From the franchisee's seat
For an owner, a royalty is a fixed claim on revenue that arrives in good months and bad. The FTC's guide is plain that royalties may be owed "even if you are losing money" (FTC). It also notes owners may have to contribute to an advertising fund. A royalty on sales, not profit, means a location can pay it while losing money.
From the area developer's seat
In many regional structures, part of each local owner's royalty is shared with the developer who recruited and supports them. That ties the developer's income to the health of the owners in its region, which is one of the better incentives in franchising.
Where to find the facts
Item 6 of the disclosure document lists ongoing fees, including royalties, advertising contributions and other recurring charges, with how they are calculated and when they are due (16 CFR 436.5). Item 11 describes the advertising program and how advertising funds were used.
Where the seats disagree
The disagreement is rarely about the percentage. It is about value: whether the support, brand and buying power the royalty pays for are worth more to the owner than the royalty costs. That is impossible to answer from the franchisor's seat alone, and easy to get wrong from the buyer's.
Royalty versus value, in practice
Owners who feel good about their royalty usually describe specific things it buys: a recognized name that brings in customers, purchasing prices they could not get alone, technology they would otherwise build, and a person who picks up the phone. Owners who resent their royalty usually describe the same list as promises that did not arrive. The percentage was the same in both cases.
Advertising contributions are a separate question
Many systems charge an advertising or brand fund contribution alongside the royalty. Item 11 must describe the advertising program and how advertising funds were used (16 CFR 436.5). Owners often judge that fee differently from the royalty: by whether national or regional marketing produces customers at their own location. That is a fair test, and one a buyer can ask owners about directly.
Minimums and fixed fees
Some systems set minimum royalties or fixed monthly fees regardless of sales. Those protect the franchisor's revenue in a slow market and put more of the risk on the owner. Item 6 shows whether they exist. They are worth modeling against a slow first year, not an average one.
The question to ask
Ask owners what they would stop doing, or have to buy themselves, if the royalty disappeared. If the list is long and real, the royalty holds up from every seat in franchising. If the list is short, it is worth knowing before signing.