On what basis are royalties and advertising fund fees calculated for Body Brain Center franchisees?

According to Body Brain Center's 2025 Franchise Disclosure Document, both the royalty fee and the advertising fund fee are calculated as a percentage of the franchisee's Program Sales. The royalty fee is 10% of Program Sales, while the advertising fund fee is 0.5% of Program Sales. Both fees are paid monthly, specifically on the sixth day of each month, for the previous month's sales. Program Sales include electronic payments made by customers through Body Brain Center's Online Payment Program. These payments are attributable to purchases of Introductory Class sessions, Trial Class sessions, Group Classes, and Private Classes at the franchisee's center.

This means that a Body Brain Center franchisee's financial obligations to the franchisor for royalties and advertising are directly tied to their revenue. As sales increase, so do the royalty and advertising fees, and vice versa. This arrangement aligns the franchisor's and franchisee's interests to some extent, as the franchisor benefits directly from the franchisee's success. However, franchisees need to carefully manage their sales and expenses to ensure they can comfortably meet these ongoing financial obligations.

In addition to the standard advertising fund fee, franchisees may also be subject to a cooperative advertising fee, which is initially set at 0.5% of Program Sales. This cooperative advertising fee can be adjusted or eliminated by a majority vote of the franchisees within the advertising cooperative. However, if Body Brain Center or its affiliate operates a majority of the centers within the cooperative, increasing the fee requires the consent of all franchisees. This structure provides some level of franchisee control over local advertising expenditures, but the franchisor retains significant influence if it operates a majority of the centers.

Prospective franchisees should carefully consider the impact of these fees on their potential profitability and cash flow. It is important to understand what constitutes 'Program Sales' and how this is defined in the franchise agreement. Additionally, franchisees should inquire about the current and planned advertising activities supported by both the national advertising fund and any local advertising cooperatives to assess the value they receive for these fees.