Under the Administrative Services Agreement, what is Brain Balance's obligation to its Parent company?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
se Agreement*
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.
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, BB Franchising, LLC has an administrative services agreement with its Parent company, Brain Balance Holdings, Inc. Under this agreement, Brain Balance is obligated to reimburse its Parent for the actual costs the Parent incurs while providing administrative support services to Brain Balance.
The fees for these administrative services were approximately $2,894,000 in 2024, $2,694,000 in 2023, and $2,197,000 in 2022. This means that Brain Balance's financial statements are directly tied to its Parent company, and its operating results could be significantly different if it operated independently.
Prospective franchisees should be aware of this related-party transaction and how it might affect the overall financial health and stability of Brain Balance. It's important to understand the nature and extent of these administrative services and how they benefit the franchise system. A potential franchisee should also consider whether these costs are reasonable and competitive compared to what might be available in the open market. Understanding these related-party transactions is crucial for making an informed investment decision.