How did the Brain Balance franchise's license and administrative service fees change from 2022 to 2023?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has a perpetual trademark license agreement with the Parent. The license agreement calls for monthly royalty payments to the Parent based on a percentage of the Company's net sales, as further defined in the agreement. For the years ended December 31, 2024, 2023, and 2022, license fees were approximately $749,000, $723,000, and $787,000, respectively.
The Company has an administrative services agreement with the Parent. The Company agreed to reimburse the Parent for the Parent's actual costs incurred in providing administrative support services on behalf of the Company. For the years ended December 31, 2024, 2023, and 2022, administrative services fees were approximately $2,894,000, $2,694,000, and $2,197,000, respectively.
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, the license fees paid to the Parent company decreased, while the administrative service fees increased from 2022 to 2023. Specifically, license fees were approximately $787,000 in 2022 and decreased to approximately $723,000 in 2023. Conversely, administrative service fees increased from approximately $2,197,000 in 2022 to approximately $2,694,000 in 2023. These fees are part of related party transactions between Brain Balance and its Parent company.
The license agreement requires Brain Balance to make monthly royalty payments to the Parent based on a percentage of net sales. The administrative services agreement stipulates that Brain Balance reimburses the Parent for actual costs incurred while providing administrative support services. These related party transactions can significantly impact Brain Balance's financial performance, as the Parent company has substantial influence over these expenses.
A prospective franchisee should be aware of these related party transactions, as they can affect the overall profitability and financial stability of the Brain Balance franchise. Understanding the nature and magnitude of these fees is crucial for assessing the true cost of operating a Brain Balance center. It would be prudent for potential franchisees to inquire about the basis for these fees and how they are determined to ensure transparency and fairness.