How are royalties calculated for an Anago master franchisee?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
or its designated Affiliates may auto debit Subfranchisor's escrow account for such amounts in the same manner and using
the same authorization that Subfranchisor grants Franchisor with respect to payment of Royalty and other fees.
ARTICLE 4 - SUBFRANCHISE FEE AND COMPENSATION
Section 4.1 - Subfranchise Fee
Subfranchisor will pay to Franchisor a Subfranchise Fee in the amount of $98,000. The Subfranchise Fee is fully earned by Franchisor and is non-refundable upon signing this Agreement in consideration for the administrative and other costs incurred by Franchisor and opportunities lost or deferred as a result of the rights granted to Subfranchisor in this Agreement, except if Subfranchisor is not accepted by Franchisor at its home office within 30 days from the Agreement Date or except as provided in Subsection 2.1(b).
Section 4.2 - Ongoing Payments to Franchisor
- (a) Royalty Fee. During the Term, Subfranchisor will pay to Franchisor a monthly royalty fee ("Royalty Fee") by the 20th day of each month equal to 5% of the previous calendar month's Gross Revenues. Subfranchisor acknowledges and agrees that its payment of Royalty Fees to Franchisor is subject to a monthly minimum equal to the greater of: (i) 5% of the previous month's Gross Revenues generated by Subfranchisor and the Unit Franchisees under the Unit Franchise Agreements; or (ii) $1,500 per month starting in the 13th month of operation, and each year thereafter the minimum monthly royalty shall increase at the rate of an additional $1,500 each year.
- (b) Administrative Support Fee. During the Term, Subfranchisor will pay to Franchisor a monthly fee of 2% of the previous calendar month
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, master franchisees, referred to as 'Subfranchisors,' are required to pay a monthly royalty fee to Anago. This royalty is calculated as 5% of the previous calendar month's Gross Revenues. The payment is due by the 20th day of each month. Gross Revenues include proceeds from business interruption insurance. However, cash refunds and credits given to clients (excluding credits for missing cleaning days) and uncollectible receivables can be deducted from Gross Revenues, provided these amounts were previously included when royalties were paid. Gross Revenues are considered received when the goods or services are delivered or the sale occurs, whichever comes first. For bartering or trade outs, the value is based on the prices applicable at the time the revenues are received.
In addition to the percentage-based royalty, Anago mandates a minimum monthly royalty payment. Starting from the 13th month of operation, the Subfranchisor must pay at least the greater of 5% of the previous month's Gross Revenues or $1,500. This minimum monthly royalty increases by $1,500 each year thereafter. For example, in the second year, the minimum monthly royalty would be $3,000, and so on. This escalating minimum royalty ensures that Anago receives a baseline income from each master franchisee, regardless of fluctuations in their Gross Revenues.
Furthermore, the Subfranchisor must also pay an administrative support fee of 2% of the previous calendar month's Gross Revenues collected. They also pay a flat fee of $400 for each Anago Unit Franchise sold by or on behalf of the Subfranchisor. These additional fees, along with the royalty fee, contribute to the overall cost of operating an Anago master franchise and should be carefully considered by prospective franchisees. The FDD specifies that all payments must be made according to the procedures designated by Anago, which are subject to change with written notice.