In a franchise relationship, which term refers to ongoing payments based on performance?

• A. Dividend
• B. Franchise
• C. Share of Stock
• D. Royalty Fees

Answer: (D)

Royalties are ongoing payments tied to performance in a franchise relationship. They are typically a percentage of gross sales (or a set per-period amount) that the franchisee pays to the franchisor for the right to use the brand and receive ongoing support. Because they scale with sales, higher performance means higher royalties, and they help fund continuing brand development, training, and systems. Dividends are distributions of profits to owners, not payments for using the franchise system; a franchise refers to the business format itself; and a share of stock denotes ownership, not a regular operating fee.