How is the Continuing Royalty calculated for a Bath Tune Up franchise each month?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
Territory from Franchisor (rather than an existing franchisee), Franchisee will also pay Franchisor a Territory Fee of $45,000. The Territory Fee is payable in a lump sum, all in lawful money of the United States of America, upon signing of this Agreement by Franchisee. The Territory Fee is not refundable.
4.3. Continuing Royalty
(a) Throughout the Term of this Agreement, Franchisee will pay a "Continuing Royalty" calculated each month in arrears equal to the greater of: (a) the percentage of Gross Revenue calculated below; or (b) a minimum monthly Continuing Royalty of $750 for the first 12 months of the Term and $1,500 thereafter:
| Continuing Royalty | Gross Revenue for Prior Month |
|---|---|
| 7.0% | $0 - $30,000 |
| 6.0% | $30,000.01 to $60,000 |
| 5.0% | $60,000.01 to $120,000 |
| 4.0% | $120,000.01 and above |
For example, if Franchisee's Gross Revenue for the prior month is $75,000, Franchisee will pay 7% for the first $30,000, 6% for the second $30,000 and 5% for the last $15,000. Gross Revenue for work performed in Gray Area is to be included.
Notwithstanding the foregoing, for the first three months of the Term, Continuing Royalty is payable on actual Gross Revenue only with no minimum.
For purposes of this Section 4.3, Gross Revenue is recognized when the work is completed and a final invoice is issued to the customer. If Franchisee has issued previous invoices to the customer prior to the final invoice, the aggregate amount of all previous invoices and the final invoice shall be reported as Gross Revenue for the prior month.
If Franchisee renews this Agreement, the amount of the Continuing Royalty throughout the renewal term will be the Continuing Royalty provided for in the then-current form of Franchise Agreement being issued by Franchisor.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, the Continuing Royalty is calculated monthly and paid in arrears. The franchisee will pay the greater of a percentage of Gross Revenue or a minimum monthly fee. For the first 12 months of the franchise term, the minimum monthly Continuing Royalty is $750, and it increases to $1,500 thereafter. For the first three months of the term, the Continuing Royalty is based on actual Gross Revenue only, with no minimum payment required. Gross Revenue includes revenue for work performed in a Gray Area. Gross Revenue is recognized when the work is completed and a final invoice is issued to the customer; if previous invoices were issued, the aggregate amount of all invoices is reported as Gross Revenue for the month.
For example, if a Bath Tune Up franchisee's Gross Revenue for a month is $75,000, the royalty is calculated as follows: 7% on the first $30,000, 6% on the next $30,000, and 5% on the remaining $15,000. If a franchisee fails to submit a Gross Revenue report when due, the Continuing Royalty will be calculated based on an imputed Gross Revenue of $60,000 for that month. If the actual Gross Revenue is later determined to be less than $60,000, the overpayment will be credited to the following month's royalty. Conversely, if the actual Gross Revenue exceeds $60,000, the underpayment will be added to the following month's royalty.
Prospective Bath Tune Up franchisees should note that the Continuing Royalty structure incentivizes accurate and timely reporting of Gross Revenue. The minimum royalty and imputed revenue calculations ensure a consistent revenue stream for the franchisor, while the tiered percentage structure allows the royalty to scale with the franchisee's success. Franchisees should carefully track their Gross Revenue and submit reports on time to avoid any discrepancies in royalty payments. Additionally, franchisees should be aware that Continuing Royalty payments are not refundable.