What components make up the transaction prices in Beggars Pizza's franchise agreements?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for providing franchisees with the franchise rights to operate a store. To determine the transaction price, the Company considers its customary business practices and the terms of the underlying agreement. For the purpose of determining transaction prices, the Company assumes performance obligations will be satisfied as promised in accordance with franchise agreements and that agreements will not be canceled, renewed or modified. The Company's franchise agreements with franchisees have transaction prices that contain a fixed and variable component. Variable consideration includes revenue related to royalties, as the transaction price is based on the franchisees sales. The variable consideration is recognized based on the actual amounts incurred each month. Franchisees receive additional services such as marketing and commissary needs, which are provided by affiliated entities as allowed by the franchise agreement. Marketing fees totaling 1% of the franchisee weekly sales are paid by franchisees directly to Beg Adv, LLC. Commissary stores at each franchisee are ordered and fulfilled with Begcom, LLC.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the transaction prices in the franchise agreements consist of both fixed and variable components. The fixed component likely refers to the initial franchise fee, which is $25,000 for a restaurant with 150 or fewer seats and $40,000 for a restaurant with more than 150 seats. A 50 percent discount is offered on the franchise fee for franchisees opening a second store.
The variable component includes revenue related to royalties, which are based on the franchisee's sales. Specifically, Beggars Pizza records royalty revenue based on 5 percent of gross sales or $500 per month, whichever is higher. These royalties are recognized over the term of the franchise agreement as the underlying sales occur and are based on the actual amounts incurred each month.
In addition to the franchise fees and royalties, franchisees also pay marketing fees, which total 1% of their weekly sales, directly to Beg Adv, LLC. Franchisees also obtain commissary supplies through Begcom, LLC. These additional fees contribute to the overall cost structure for a Beggars Pizza franchisee.