What are 'Issuer Expenses' for the Buff City Soap gift card program?
Buff_City_Soap Franchise · 2025 FDDAnswer from 2025 FDD Document
"Issuer Expenses" means the sum of Issuer's Direct Costs and Issuer's Indirect Costs, with no reduction for any potential income from unredeemed Gift Cards. "Direct Costs" means and includes all costs identified specifically with the Issuer services, including an allocable portion of costs for compensation, bonuses and travel expenses attributable to employees directly engaged in providing Issuer services, for materials and supplies directly consumed in providing Issuer services, and for other direct costs, such as costs of printing, storing, and shipping Gift Cards, shared services costs, costs of marketing and promotional services provided by any third party service providers, promotional discounts on Gift Cards, and license fees for intellectual property.
Direct Costs shall not include interest expense on indebtedness not incurred specifically for the benefit of you. "Indirect Costs" means and includes all costs that are not specifically identified with the Issuer services but that relate to the Direct Costs.
Indirect Costs may include (for example) costs with respect to utilities, occupancy and other overhead burdens.
The estimate of Issuer Expenses for each measurement period, which shall be at least quarterly, shall be made by Issuer or its agent.
Issuer (or its agent) may make its estimates by any reasonable method.
Source: Item 5 — INITIAL FEES (FDD pages 15–23)
What This Means (2025 FDD)
According to Buff City Soap's 2025 Franchise Disclosure Document, 'Issuer Expenses' for the gift card program encompass the sum of the Issuer's Direct Costs and Indirect Costs, without any reduction for potential income from unredeemed gift cards. Direct Costs include expenses specifically tied to the Issuer's services, such as compensation, bonuses, and travel for employees directly involved in providing these services. It also covers the costs of materials, supplies, printing, storing, and shipping gift cards, shared services costs, marketing and promotional services by third parties, promotional discounts on gift cards, and intellectual property license fees. Importantly, interest expenses on debt not specifically incurred for the franchisee's benefit are excluded from Direct Costs.
Indirect Costs include expenses not directly identified with the Issuer's services but related to the Direct Costs. Examples of Indirect Costs include utilities, occupancy, and other overhead burdens. The Issuer, or its agent, estimates these expenses at least quarterly using any reasonable method.
For a Buff City Soap franchisee, understanding these 'Issuer Expenses' is crucial because they form the basis for the service fees charged under the Gift Card Program Agreement. The franchisee will pay a fee calculated as Issuer expenses multiplied by 105%, due within 20 days after the invoice date. This means that any increase in these direct and indirect costs will directly impact the fees that the franchisee is required to pay. Therefore, it is important for prospective franchisees to understand how these costs are calculated and what factors might cause them to fluctuate.