Does the Buns On Fire royalty fee include income related to catering services?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of this franchise granted hereby, the services to be provided by Franchisor hereunder, the right to prepare and sell the Products, to the general public, and for the use of the Marks during the term hereof and any subsequent renewals, Franchisee shall pay to Franchisor, in addition to the Initial Franchise Fee stated herein, a royalty fee equal to six percent (6%) of the gross revenue generated by, from, or through the Franchisee's Franchised Business (the "Royalty Fee").
5.3 Definition of "Gross Revenue"
For the purposes of determining the royalties to be paid hereunder, "Gross Revenue" means all revenue of the Franchise Business, including all sales of products and services to customers of the Franchise Business, including income related to catering and delivery services, and any sales or orders of food products or food preparation services provided from or related to the Franchise Business, whether for cash or credit and regardless of collection in the case of credit. In the event of a cash shortage, the amount of Gross Revenue shall be determined based on the records of the electronic cash register system and any cash shortage shall not be considered in the determination. Gross Revenue shall expressly exclude the following:
(i.) Sums representing sales taxes collected directly from customers, based upon present or future
laws of federal, state or local governments, collected by Franchisee in the operation of the Franchised Business, and any other tax, excise or duty which is levied or assessed against Franchisee by any federal, state, municipal or local authority, based on sales of specific merchandise sold at or from the Franchised Business, provided that such taxes are actually transmitted to the appropriate taxing authority;
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to Buns On Fire's 2025 Franchise Disclosure Document, the royalty fee calculation includes income from catering services. The Royalty Fee is 6% of the franchise's gross revenue. Gross Revenue is defined as all revenue from the franchise, including sales of products and services to customers, income from catering and delivery services, and any sales or orders of food products or food preparation services related to the franchise. This applies whether the sales are for cash or credit, and regardless of whether the payment has been collected.
This means that a Buns On Fire franchisee must pay a royalty fee of 6% on all revenue, including any revenue generated through catering services. This is a standard practice in the franchise industry, where royalties are typically calculated as a percentage of gross sales.
However, the FDD also specifies some exclusions from Gross Revenue. Sums representing sales taxes collected directly from customers and remitted to the appropriate taxing authority are excluded from the Gross Revenue calculation. This ensures that franchisees are not paying royalties on taxes they collect on behalf of the government.