How are continuing fees (royalties) charged to Beard Papas' domestic franchisees?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
nt standard Franchise Agreement must be executed by the Franchisee for each and every Development Shop on or before the earlier of: (a) the date Franchisee (subject to Franchisor's approval of the Shop Location) executes a lease for the Shop Location for each respective Development Shop; (b) the date Franchisee (subject to Franchisor's approval of the Shop Location) enters into a purchase agreement for the real estate for the Shop Location for each respective Development Shop; or (c) six months prior to the date that each respective Development Shop must be open and in operation pursuant to the Development Schedule.
5.2 ROYALTY FEES AND OTHER FRANCHISE AGREEMENT FEES ACKNOWLEDGMENT
Franchisee agrees that pursuant to the terms of each respective Franchise Agreement respecting and/or concerning the Development Area and/or this Agreement, that nothing contained in this Agreement shall obviate and/or reduce Franchisee's obligations as set forth in each respective Franchise Agreement including, without limitation, Franchisee's obligations, respectively, to pay royalty and all other fees in accordance with each respective Franchise Agreement. Nothing contained in this Agreement shall modify, reduce or mitigate Franchisee's obligations to Franchisor. The only fee and right contained in the Franchise Agreement that is modified by this Agreement is the fixed one-time initial franchise fee paid by Franchisee to Franchisor at the time of signing the Franchise Agreement, as such initial franchise fee is set forth and defined in Section 4.2 of this Agreement as to the Development Shops.
5.3 MODIFICATIONS TO FRANCHISE AGREEMENT
Franchisee agrees that what constitutes Franchisor's then current Franchise Agreement shall be determined by Franchisor, in Franchisor's exclusive discretion and that, among other things, the Franchise Agreement may be modified from time to time by Franchisor and that reasonable modification and amendments to the Franchise Agreement will not alter Franchisee's obligations under this Agreement.
5.4 COMPLIANCE WITH FRANCHISE AGREEMENTS
Franchisee will operate the Development Shops and all other Beard Papa's Shops in strict compliance with the terms and conditions of each respective Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to the 2025 Beard Papas Franchise Disclosure Document, franchisees are obligated to pay royalty fees as outlined in their respective Franchise Agreements. The FDD emphasizes that nothing within the agreement reduces a franchisee's obligation to pay these royalties and other fees according to the terms of their specific Franchise Agreement. The franchisor has sole discretion to apply any payments received from Franchisee or to offset any indebtedness of Franchisee to Franchisor to any past due indebtedness of Franchisee for Royalty Fees, Advertising Contributions, purchases from Franchisor or its affiliates, interest or any other indebtedness of Franchisee to Franchisor or its affiliates. Franchisees are not entitled to withhold payments due to Beard Papas under any circumstances, even if they claim non-performance by the franchisor.
For a prospective Beard Papas franchisee, this means that understanding the specifics of the royalty fee structure in the Franchise Agreement is crucial. The franchisee must be aware of how the royalty is calculated (e.g., as a percentage of gross sales) and when it is due. The FDD makes it clear that these obligations are not reduced or mitigated by other agreements, and Beard Papas retains the right to modify the Franchise Agreement, which could potentially affect these fees.
Furthermore, the FDD highlights that franchisees cannot withhold royalty payments, even if they believe Beard Papas is not fulfilling its obligations. This underscores the importance of resolving disputes through proper channels rather than unilaterally withholding payments, which could lead to a breach of contract. Prospective franchisees should carefully review the dispute resolution process outlined in the FDD and Franchise Agreement to understand their options in case of disagreements.
In the event of a transfer of ownership, the outgoing franchisee is no longer obligated to pay royalty fees that accrue after the date of the approved transfer, provided the transfer fully complies with the outlined requirements. This provides some financial relief to the seller after the business has been successfully transferred to a new owner. However, the transferee may be required to complete further training programs.