Does BAB, Inc. derive revenue from Big Apple Bagels franchisees' coffee purchases?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
OF PRODUCTS AND SERVICES**
A. FRANCHISE AGREEMENT
You must purchase all your coffee, which is branded in your store as Brewster's, from our designated supplier. The term "supplier" in this disclosure document, when used in connection with our right to designate or approve suppliers from whom Franchisee must purchase products or services, includes not only the manufacturer, but also the distributor of those products or services. BAB, Inc. will derive revenue in the form of a license fee on your purchases of coffee from the designated source under a trademark licensing agreement between BAB, Inc., an affiliate of BAB, and the designated source. The license fee is a certain amount for each pound of coffee purchased by you from the designated source.
You must purchase your cream cheese, either in block form or prepackaged spreads, from our designated supplier. BAB, Inc. will derive revenue in the form of a license fee on your purchases of cream cheese from the designated source under a licensing agreement between BAB, Inc., an affiliate of BAB, and the designated source.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 35–38)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, BAB, Inc. does derive revenue from franchisees' coffee purchases. Franchisees are required to purchase all coffee, branded as Brewster's, from a designated supplier. BAB, Inc. receives revenue in the form of a license fee based on the amount of coffee franchisees purchase from this designated source. This fee is collected under a trademark licensing agreement between BAB, Inc. and the designated supplier.
In the fiscal year ending November 30, 2024, BAB, Inc. reported license fee revenue of $80,490 from coffee purchases made by franchisees, including both My Favorite Muffin and Big Apple Bagels franchisees. This indicates that a significant portion of BAB, Inc.'s revenue is directly tied to the volume of coffee sold at franchise locations.
This arrangement is common in franchising, where franchisors often negotiate deals with suppliers and receive a portion of the revenue generated from franchisee purchases. For a prospective Big Apple Bagels franchisee, this means that the cost of coffee will likely include a built-in license fee that contributes to the franchisor's income. Franchisees should consider this when evaluating their potential profit margins and pricing strategies.