What do continuing franchise fees consist of for a Bath Tune Up franchise?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
ments, and may include royalty percentage de-escalation clauses whereby the royalty percentage applied on the sales generated are decreased if certain sales thresholds are obtained.
Continuing franchise fees – consist of service fees, renewal and transfer fees, and NAF fees paid by franchisees, as determined by the franchise agreements. The service fees relate to the performance obligations for the Company to provide monthly access to services that may include IT support, phone and call center support, and other related services. These fees are typically fixed per the franchise agreements and do not have predetermined escalation amounts. These fees are recognized monthly as the franchise utilizes the right to access the services.
Renewal and transfer fees are related to an existing franchisee renewing a franchise agreement for another term as specified by the franchise agreement, or transferring all or a portion of their agreed territories. These fees are determined by the franchise agreement and are recognized upon execution of the renewal or transfer agreement.
The franchisees are contractually obligated to contribute NAF fees for the purpose of providing national advertising for the benefit of the franchisees. Variable sales-based NAF fees are recognized as revenue in the period the franchisee generates sales. The franchise agreements allow the Company to retain a certain percentage of NAF fees for consideration of the administration of the brand advertisi
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 51–52)
What This Means (2025 FDD)
According to the 2025 Bath Tune Up FDD, continuing franchise fees consist of service fees, renewal and transfer fees, and National Advertising Fund (NAF) fees paid by franchisees, as determined by the franchise agreements. These fees cover the Company's performance obligations to provide monthly access to services such as IT support, phone and call center support, and other related services. These service fees are typically fixed and do not have predetermined escalation amounts.
Renewal and transfer fees are associated with franchisees renewing their agreements or transferring territories, with the amounts determined by the franchise agreement and recognized upon execution of the renewal or transfer agreement. Franchisees are also contractually obligated to contribute to the NAF for national advertising. The FDD states that during the years ended December 31, 2024 and 2023, Bath Tune Up recorded $1,661,384 and $1,596,423 of NAF revenue in Continuing franchise fees on the Statements of Operations.
For a prospective Bath Tune Up franchisee, understanding these continuing fees is crucial for financial planning. The fixed nature of the service fees provides predictability, while renewal and transfer fees represent potential costs associated with extending or modifying the franchise agreement. The NAF contributions ensure ongoing marketing support, but franchisees should be aware of how these funds are managed and allocated. Franchisees should also note that the company is allowed to retain a percentage of NAF fees for administering the brand advertising fund.