How are royalties calculated for a Boulder Designs franchise?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties are calculated as a percentage of franchise monthly dues and annual fees over the term of the franchise agreement. Initial and successor franchise fees are payable by the franchisee upon signing a new franchise agreement or successor franchise agreement, and transfer fees are paid to the Company when one franchisee transfers a franchise agreement to a different franchisee. The franchise royalties represent sales-based royalties that are related entirely to the performance obligation under the franchise agreement and are recognized as franchise sales occur.
Source: Item 23 — RECEIPT (FDD pages 50–217)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, royalties are calculated as a percentage of franchise monthly dues and annual fees over the term of the franchise agreement. These royalties represent sales-based royalties that are directly tied to the performance obligation under the franchise agreement and are recognized as franchise sales occur.
For a prospective Boulder Designs franchisee, this means that the amount of royalties paid to Boulder Designs Franchising, LLC will fluctuate based on the monthly dues and annual fees generated by their franchise. This is a common arrangement in franchising, where royalties are typically a percentage of gross sales or revenues.
The FDD also states that Boulder Designs recognizes revenue for the amount of consideration to which it is expected to be entitled as the transfer of promised goods or services are provided to customers. Franchise revenues consist primarily of royalties, initial and successor franchise fees, transfer fees, and other fees and commission income. The company's primary performance obligations under the franchise license is providing certain pre-opening services and granting certain rights to use the company's intellectual property. All other services the company provides under the franchise agreement are highly interrelated, not distinct within the contract, and therefore accounted for as a single performance obligation, which is satisfied by granting certain rights to use intellectual property over the term of each franchise agreement.
Initial and successor franchise fees are payable by the franchisee upon signing a new franchise agreement or successor franchise agreement, and transfer fees are paid to the Company when one franchisee transfers a franchise agreement to a different franchisee. The company allocates a portion of the initial franchise fee to pre-opening services, which is recognized as revenue once those services are provided. The remaining initial fee and successor franchise fees, as well as transfer fees, are recognized as revenue on a straight-line basis over the term of the respective franchise agreement.