How are Alloy franchise royalties earned and 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)
Based on the 2025 Alloy Franchise Disclosure Document, the company collects brand fund fees which function as royalties. These fees are structured as 2% of the franchisee's reported sales.
The collected funds are designated solely for advertising and related expenses that benefit the franchisees. A portion of these funds can be used to offset Alloy's administrative costs for managing the funds, with the allocation determined at the company's discretion.
As of December 31, 2024, the total unexpended funds collected for franchisees' benefit amounted to $403,344, while on December 31, 2023, the corresponding amount was $185,052. The FDD specifies that there were no funds spent on behalf of franchisees that had not yet been received by Alloy for the years ended December 31, 2024, 2023 and 2022. This indicates that Alloy operates on a cash basis regarding the brand fund, ensuring funds are received before expenditures are made.