Glossary · Reading the business
Royalty
In short
A royalty is a payment made for the ongoing use of an asset, like intellectual property or a brand name, often a percentage of revenue. In an acquisition, it's an ongoing expense that reduces the business's cash flow.
What it means in a deal
If the business you're buying is a franchise, you'll almost certainly pay ongoing royalties to the franchisor. These payments are a fixed cost of doing business and must be factored into your financial projections and repayment capacity analysis. Understand the terms of any royalty agreements, as they impact profitability and debt service coverage.
Related terms
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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