What revenue does BAB, Inc. derive from a Big Apple Bagels franchisee's 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, franchisees must purchase all coffee, branded as Brewster's, from a designated supplier. BAB, Inc. generates revenue through a license fee on these coffee purchases, based on a trademark licensing agreement with the designated supplier. The license fee is calculated per pound of coffee purchased by the franchisee. In its fiscal year ended November 30, 2024, BAB, Inc. derived license fee revenue of $80,490 from coffee purchases, which includes revenue from My Favorite Muffin franchisees as well as Big Apple Bagels franchisees.
This arrangement means that a portion of every dollar a Big Apple Bagels franchisee spends on coffee goes back to BAB, Inc. as a licensing fee. This revenue stream is separate from any profits the franchisee makes from selling the coffee to customers. The franchisee is obligated to buy coffee from the designated supplier, ensuring BAB, Inc. receives this licensing revenue.
Prospective franchisees should consider the cost of coffee and the associated license fees when evaluating the potential profitability of a Big Apple Bagels franchise. Understanding the specific amount of the license fee per pound of coffee is crucial for accurate financial projections. Franchisees should also inquire about any potential changes to the designated supplier or the licensing agreement, as these could impact their costs and BAB, Inc.'s revenue.