How does Browns Chicken determine the royalty rates for franchises?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty Fee on food sales1 | 5% of Gross Sales2 subject to modification as provided below. | Weekly | You must pay by automatic bank draft. |
| Video Gaming Royalty Fee | 10% of gross sales from Video Gaming revenue. | Weekly | You must pay by automatic bank draft. |
- 2/ As used in this item, the term "Gross Sales" shall mean the aggregate actual gross selling prices of all foods, beverages and other products and services (including entertainment/video gaming) sold and/or performed and/or offered by or for you or the Store, in, upon or from the premises, or through or by means of the business conducted therein or otherwise by the Store or Franchise, whether for cash or for credit, provided that in determining the amount of Gross Sales, there are excluded: (a) sales, use or excise taxes passed on as such to the customer and paid to the appropriate taxing authorities; (b) the amount of all refunds, adjustments, credits and allowances made by the Store; and (c) revenues of any fees paid by you to Third-Party Delivery Services, as determined by Brown and published in Brown's Operating Manual or as promulgated in writing by Brown. A "Third-Party Delivery Service" is a company or business through which customers purchase menu items from the Store, that delivers the menu items to the customers at a location other than the Store. Third-Party Delivery Services typically charge you a fee for this service, which may be automatically deducted from the funds that are collected from the customer prior to disbursement
We waive royalties for one store that serves as our training facility. We also reduced the royalties for one store for a new franchisee, to assist them during their initial stage of operation.
- 1/ Periodically, as part of community service projects, Brown may reduce or not charge this fee.
- 6/ Brown has negotiated royalty rates on a case by case basis, depending on the circumstances involved.
Source: Item 6 — OTHER FEES (FDD pages 13–15)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the standard royalty fee is 5% of gross sales, though this is subject to modification. Browns Chicken also charges a 10% royalty fee on gross sales from video gaming revenue. These royalty fees are paid weekly via automatic bank draft. Gross sales are defined as the aggregate actual gross selling prices of all foods, beverages, other products, and services sold by the store, excluding sales, use, or excise taxes; refunds, adjustments, credits, and allowances; and revenues of any fees paid to Third-Party Delivery Services.
Browns Chicken may periodically reduce or not charge the standard 5% royalty fee as part of community service projects. The document also mentions that Browns Chicken has negotiated royalty rates on a case-by-case basis, depending on the circumstances involved. The FDD notes that Browns Chicken waived royalties for one store that serves as their training facility and reduced royalties for one store for a new franchisee to assist them during their initial stage of operation.
It is important for prospective franchisees to understand the conditions under which Browns Chicken might modify the standard royalty fee. While the standard royalty is 5%, the potential for individually negotiated rates introduces some uncertainty. A prospective franchisee should inquire about the specific circumstances that would warrant a different royalty rate and seek clarification on how these negotiations are conducted. Understanding these factors is crucial for accurately forecasting expenses and profitability.