What is the maximum royalty fee a Bhc franchisee can charge to subfranchisees?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
Item 6: Other Fees
OTHER FEES
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty Fee from Affiliate Franchised BHC Restaurants | 4.5% of Gross Revenue (2)(3) | Payable monthly on the following 5th days for the previous month (unless that day is a banking holiday, in which case the Royalties are due and payable on the next business day). Royalties will be calculated on the Gross Revenues received during every two (2) weeks. | Paid to us. We require payment by electronic funds transfer ("EFT"). We reserve the right, upon 90 days' written notice to you, to require you to pay Royalty Fees on a more frequent basis, including monthly or weekly |
| Royalty Fee from Subfranchised BHC Restaurants | 4.5% Gross Revenues of Subfranchised BHC Restaurants. (3) | Same date as the Royalty Fee from Affiliate Franchised BHC Restaurants | Paid to us. We require payment by electronic funds transfer ("EFT"). We reserve the right, upon 90 days' written notice to you, to require you to pay Royalty Fees on a more frequent basis, including monthly or weekly The maximum royalty you can charge Subfranchisee is 7% of Gross Revenues. |
Source: Item 6 — Other Fees (FDD pages 12–18)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a franchisee is limited in the amount they can charge subfranchisees for royalty fees. Specifically, the royalty fee charged to subfranchisees cannot exceed 7% of the subfranchised Bhc restaurant's gross revenues. This fee is calculated from the gross revenues of the subfranchised locations.
This limitation is important for prospective Bhc master franchisees who plan to subfranchise, as it caps the potential revenue they can derive from royalty fees. While they can set the royalty fee at any level below 7%, they cannot exceed this threshold. This ensures that subfranchisees are not burdened with excessive fees, which could impact their profitability and overall success.
It's also important to note that the subfranchisees themselves must pay Bhc a royalty fee of 4.5% of their gross revenues. This means that the master franchisee retains the difference between what they charge the subfranchisee (up to 7%) and the 4.5% remitted to Bhc. The master franchisee needs to carefully consider this margin when setting royalty fees for their subfranchisees to ensure profitability for both parties.
This structure is fairly common in franchising, where the franchisor sets a base royalty and allows master franchisees to add a margin for their services in managing and supporting subfranchisees. However, the specific percentages and limitations can vary significantly between franchise systems, so it's crucial for prospective franchisees to understand these details before investing.