Royalty payments let you earn money when others use your brand or idea. For example, if a company wants to use your brand to sell their products, they pay you a percentage of the sales. If you want to use someone else's brand or idea, you pay them.

It's important to understand the details before agreeing to a royalty deal. Both the person letting others use their brand or idea (licensor) and the person using it (licensee) need to agree on things like payment amount and duration.


Business royalties happen when one business uses another's intellectual property or patent to make money. The owner of that property then gets a cut of the profit.

There's another type called royalty financing. Here, a business pays an investor a royalty to get quick funding for growth.

Franchise operators pay royalties to use the branding and model of successful franchises.

Royalties can be a percentage or a flat rate. Both parties agree on this in a licensing agreement. It also defines what the property is and how it can be used.


  1. Intellectual Property
  2. Franchises
  3. Resources
  4. Products

Intellectual Property Royalty

Intellectual property rights lead to different kinds of royalties. One way is through patents. If you own a patent, you can let others use it for a fee or stop them from using it. For instance, if you own a comics brand, you can patent your characters to prevent others from using them without permission.

Brands can license their logos to other brands for use. Musicians copyright their music so they get paid when it's played on the radio or in public places.

Franchise Royalty

One of the most renowned franchise examples in India is Cafe Coffee Day (CCD). Each CCD outlet operator pays a royalty fee to the corporate owners to use their branding, business model, and gain access to their supply chains and products.

Resource Royalty

Landowners can earn royalties by letting businesses use their land to make money. For instance, they might get paid for allowing oil drilling or letting cattle graze on their land.

Product Royalty

Companies that make a product can earn royalties by allowing another product to use it. This benefits both parties, as the product using the licensed one gains credibility and features. For example, PC manufacturers license an operating system to install on the computers they sell, improving the functionality and appeal of their products.
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