How is Post-Royalties, Brand Fund, and Technology Fee EBITDAR calculated for a 7 Brew franchise?

According to 7 Brew's 2025 Franchise Disclosure Document, Post-Royalties, Brand Fund, and Technology Fee EBITDAR is calculated by subtracting Royalties expense, Brand Fund expense, and the Technology Fee from Store-Level EBITDAR. The FDD defines Store-Level EBITDAR as earnings before interest, taxes, depreciation, amortization, and rent.

For a prospective 7 Brew franchisee, this calculation is important because it provides a view of earnings after deducting the ongoing fees payable to the franchisor. Royalties are a percentage of gross sales, as defined in the Franchise Agreement. The Brand Fund contribution is also a percentage of gross sales, which 7 Brew has the right to require. The Technology Fee is another percentage of gross sales that 7 Brew can mandate. For Fiscal Year 2024, the Brand Fund expense was 1% of a store's gross sales, and no Technology Fee was charged.

It is important to note that the rent expense is omitted from the EBITDAR calculation due to the wide variation in rental payment amounts across stores, which is primarily due to the different rental structures. These structures include ground leases, build-to-suit leases, properties purchased by an affiliate and leased back, and properties purchased directly by the store operator. 7 Brew generally advises that rent expense should be no more than 5% of the store's gross sales, regardless of the specific rental structure.

Understanding how Post-Royalties, Brand Fund, and Technology Fee EBITDAR is calculated allows a potential franchisee to better assess the profitability of a 7 Brew franchise by accounting for the deductions of royalties, brand fund, and technology fees from the store-level EBITDAR. This provides a clearer picture of the earnings available to cover other expenses like rent, debt service, and taxes, and ultimately, the franchisee's potential profit.