What are the components of Better Blend's revenue from conventional franchised restaurants?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's revenue consists of fees from franchised restaurants operated by conventional franchisees. Revenue from conventional franchised restaurants include initial franchise fees, royalties based on percent of sales, marketing fees based on percent of sales, and development fees for locations the franchisee opens in addition to the initial location.
Royalties are collected on a weekly basis and are based on certain percentage as specified on the franchise agreement. Marketing fees are based on up to 1% of gross revenue. The marketing fund is used for marketing expenses related to maximizing public recognition of the Company's brand and marketing fund.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the company generates revenue from fees paid by its conventional franchisees. These revenue streams consist of several components.
First, Better Blend collects initial franchise fees, which are payments made by new franchisees upon joining the system. Second, the company receives royalties, which are ongoing payments calculated as a percentage of each franchisee's sales. Third, Better Blend collects marketing fees, also based on a percentage of sales, which contribute to a marketing fund used to promote the Better Blend brand. The marketing fees are based on up to 1% of gross revenue. Finally, Better Blend may receive development fees when a franchisee opens additional locations beyond their initial one.
For a prospective Better Blend franchisee, understanding these revenue components is crucial. It clarifies the ongoing financial obligations to the franchisor and how the franchisee's sales directly contribute to royalty and marketing fee payments. The franchisee should also inquire about the specific percentages used for royalty and marketing fees, as these can significantly impact their profitability. Additionally, understanding the use of the marketing fund can help franchisees assess the value they receive in brand promotion and support.