When is the Royalty Fee due to Big Frog Custom T Shirts More?
Big_Frog_Custom_T_Shirts_More Franchise · 2024 FDDAnswer from 2024 FDD Document
any's Franchise Disclosure Document (FDD), which is in substantial compliance with Federal Trade Commission (FTC) regulations entitled "Disclosure Requirements and Prohibition Concerning Franchise and Business Opportunity Ventures," as set forth in 16 CFR, Section 436.1, et. seq. (FTC franchise).
The Franchise Agreement currently establishes a monthly royalty fee of 6% of gross revenue, with a minimum monthly fee of $1,200; the minimum monthly fee is effective 6 months subsequent to the franchise opening for business. For franchises granted from 2012 through March 2014, the monthly royalty fee is 5% of gross
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2024 FDD)
According to Big Frog Custom T Shirts More's 2024 Franchise Disclosure Document, the Franchise Agreement stipulates a monthly royalty fee of 6% of gross revenue. However, there's a minimum monthly fee of $1,200 that becomes effective six months after the franchise opens for business. For franchises granted from 2012 through March 2014, the royalty fee structure differs, involving tiered percentages based on gross revenue levels.
For new Big Frog Custom T Shirts More franchisees, royalty fees are applied starting in the first month the store opens. This means that even before hitting the six-month mark where the minimum fee applies, franchisees are responsible for paying the royalty fee based on their gross revenue.
This immediate application of royalty fees is a significant factor for prospective franchisees to consider. It means that from day one, a portion of the revenue generated must be allocated to royalty payments, impacting the initial cash flow and profitability of the business. Franchisees should factor this into their financial projections and business plans to ensure they can meet these obligations while covering other startup and operational costs.
The tiered royalty structure for franchises granted from 2012 through March 2014 provides an example of how royalty fees can vary. While this specific structure doesn't apply to new franchisees, it highlights the importance of understanding the exact terms of the Franchise Agreement regarding royalty payments, as these can have a direct impact on the financial performance of the franchise.