How does the initial franchise fee for Bft in Item 5 relate to the ongoing royalty fees in Item 6?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 5: INITIAL FEES]
ITEM 5 INITIAL FEES
Franchise Agreement
Initial Franchise Fee
You must pay to us a lump sum initial franchise fee of $60,000 (the "Initial Franchise Fee") to establish a single Studio under a Franchise Agreement. The Initial Franchise Fee is due upon the signing of the Franchise Agreement. The Initial Franchise Fee will be fully earned by us upon payment and is not refundable, in whole or in part, under any circumstance.
Separately, if you (or your affiliates) already own and operate a BFT Studio, then the Initial Franchise Fee for your second franchise will be reduced to $50,000. If you (or your affiliates) already own and operate at least two BFT Studios, then the Initial Franchise Fee for your third or subsequent franchise(s) will be reduced to $40,000. These reduced Initial Franchise Fees are conditioned on the prerequisite that you (and your affiliates) are in compliance with all franchise agreements and any other agreement between us (and our affiliates) and you (and your affiliates).
[Item 6: OTHER FEES]
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty | 7% of Gross Sales generated by your Studio over the relevant reporting period 1 | Payable weekly via electronic funds transfer (“EFT”) based on the Gross Sales of your Studio during the preceding business week | You will be required to start paying your Royalty once your Studio begins collecting revenue from operations. We may collect your Royalty on a different interval (for example, monthly). |
- 5.2 Royalty Fee. Throughout the Term, Franchisee agrees to pay Franchisor, weekly, without setoff, credit or deduction of any nature, a royalty fee equal to seven percent (7%) of the Gross Sales (as that term is defined in Section 5.3, below) generated by the Studio over the immediately preceding week (the "Royalty" or "Royalty Fee").
- 5.3 Gross Sales. "Gross Sales" means the total revenue, in whatever form, generated by the Studio, whether or not in compliance with this Agreement and regardless of receipt, including all revenue generated from the sale and provision of any and all gift cards and other products and services at or through the Studio and all proceeds from any business interruption insurance related to the non-operation of the Studio. "Gross Sales" does not include (a) any sales tax and equivalent taxes that are collected by Franchisee for or on behalf of any governmental taxing authority and paid thereto, or (b) the value of any allowance issued or granted to any client of the Studio that is credited in good faith by Franchisee in full or partial satisfaction of the price of the Approved Products or Approved Services offered in connection with the Studio.
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, Item 5 details the initial fees, including the initial franchise fee, while Item 6 outlines other fees, including the ongoing royalty fees. The initial franchise fee for a single Bft studio is $60,000, which is a one-time, non-refundable payment due upon signing the Franchise Agreement. This fee grants the franchisee the right to operate a Bft studio. The initial franchise fee may be reduced to $50,000 or $40,000 if the franchisee already owns and operates one or two Bft studios, respectively, provided they are in compliance with all agreements. Item 5 also mentions a sourcing fee ranging from $28,000 to $120,000 in addition to the initial franchise fee under certain conditions.
In contrast, the royalty fee, as described in Item 6, is an ongoing payment. Bft franchisees must pay a weekly royalty fee equal to 7% of the gross sales generated by their studio. Gross sales include all revenue generated by the studio, including revenue from gift cards and business interruption insurance, but excludes sales tax and allowances credited to clients. The royalty payments start once the studio begins collecting revenue.
Therefore, the initial franchise fee is a one-time, upfront cost to obtain the franchise, while the royalty fee is an ongoing percentage of revenue paid regularly throughout the term of the franchise agreement. The initial fee provides the right to operate under the Bft brand, while the royalty fee compensates Bft for the continued use of its brand, systems, and support. These two fees represent distinct financial obligations for the franchisee, with the initial fee being a fixed cost and the royalty fee being a variable cost dependent on the studio's performance. Item 6 also lists other fees such as a Brand Development Fund contribution (currently 2% of gross sales), technology fee (currently $715 per month), and potential costs for advertising, music licensing, insurance, audits, and other operational requirements.