How often are royalties billed to Beauty Bungalows franchisees?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
When a franchisee purchases a franchise, the Company grants the franchisee the rights to operate in a designated area and to use the proprietary methods, techniques, trade dress, trademarks, and logos ("the license"). The license is considered to be symbolic intellectual property. Revenues related to the license are continuing royalties based on a fixed percentage of gross sales of each location. These revenues will be used to continue the development of the Company's brand, the franchise system and provide ongoing support for the Company's franchisees over the term of the agreement. The royalties are billed monthly and are recognized as revenue when earned. For the years ended December 31, 2024 and 2023, there were no royalties earned.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, royalties are billed to franchisees on a monthly basis. These royalties are calculated as a fixed percentage of the gross sales of each Beauty Bungalows location. The FDD states that these royalty revenues are intended to support the continued development of the Beauty Bungalows brand, the franchise system, and the provision of ongoing support to franchisees throughout the term of their franchise agreement.
It's important to note that, according to the financial statements provided in the FDD, Beauty Bungalows had not earned any royalty revenue for the years ended December 31, 2024, and 2023. This could be due to the franchise system being relatively new or to a delay in franchisees opening their locations and generating sales.
For a prospective Beauty Bungalows franchisee, the monthly billing of royalties means that they will need to ensure they have sufficient cash flow to cover this expense regularly. Understanding the specific percentage charged for royalties and how it compares to other similar franchise systems is crucial for financial planning. Additionally, it would be prudent to inquire about the reasons for the lack of royalty revenue in previous years to assess the current state and growth trajectory of the Beauty Bungalows franchise system.