When are royalty fees due for a Bens Soft Pretzels franchise?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
ded in the franchise or license agreement. Incidental items that are immaterial in the context of the contract are recognized as expense.
Royalty Fee Revenue – Franchises are required to pay the Company a royalty fee based on a percentage of its gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards. Revenue is recognized on a weekly basis based on the prior week's sales. A receivable is recorded at year end based on average sales per day for the week that spans year end. Royalty fees are due on a weekly basis.
Advertising Fund Fee Revenue – Franchises are also required to pay the Company ad fund fees based on a percentage of its gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards. In return for these fees, the Company advertises on behalf of the brand as a whole. Franchises can also apply for reimbursement of general advertising expenses that they directly incur. Revenue is recognized on a weekly basis based on the prior week's sales. A receivable is recorded at year end based on average sales per day for the week that spans year end. The adoption of ASU No. 2014-09 did not result in a change to how advertising fee revenue is recognized.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 Bens Soft Pretzels Franchise Disclosure Document, royalty fees are due on a weekly basis. The royalty fee is a percentage of the franchise's gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards. Bens Soft Pretzels recognizes this revenue weekly based on the prior week's sales. At the end of the year, a receivable is recorded based on average sales per day for the week that spans year end.
This weekly payment schedule is a common practice in the franchise industry, allowing franchisors to maintain a consistent revenue stream and monitor the financial health of their franchisees. For a prospective franchisee, this means they need to ensure they have sufficient cash flow to cover the royalty payments each week, in addition to other operating expenses.
It's important to note that the royalty fee is based on gross sales, not net profit. Therefore, franchisees must accurately track their sales and deductions to calculate the correct royalty amount. The FDD also mentions that advertising fund fees are collected and recognized in the same manner as royalty fees, meaning these are also due weekly. Franchisees should factor both royalty and advertising fees into their weekly financial planning.