How are Alloy's franchise royalties calculated and when are they recognized?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
. Pursuant to the shared-services arrangement, the Company was allocated $384,246 of shared-services costs for the year ended December 31, 2022, which are included in "Selling, general and administrative expenses" in the accompanying statements of operations and members' deficit.
Beginning January 2023, the Company began to provide certain services previously provided by Alloy. For these services, the Company allocated $33,610 and $45,804 of such costs to Alloy for the years ended December 31, 2024 and 2023, respectively, which are recognized as "Members' distributions" in the accompanying statement of operations and members' deficit.
**NOTE 9. BRAND
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees must pay a brand fund fee. This fee is calculated as 2% of the franchisee's reported sales. These funds are designated for advertising and related expenses to benefit the franchisees. Alloy retains the discretion to allocate a portion of these funds to offset the company's administrative costs for managing the fund.
The FDD also states that as of December 31, 2024, the total funds collected but not yet spent on behalf of franchisees amounted to $403,344. The corresponding figure as of December 31, 2023, was $185,052. The document specifies that for the years ended December 31, 2024, 2023, and 2022, there were no instances of funds expended on behalf of the franchisees that had not yet been received by Alloy.
It is important for prospective Alloy franchisees to understand how these brand fund fees are used and managed, as they directly impact the franchisee's costs and the franchisor's support for marketing and advertising efforts. Franchisees should seek clarification from Alloy regarding the specific allocation of these funds, the decision-making process for advertising strategies, and the potential return on investment they can expect from these contributions.