How are royalties and franchisee contributions to national marketing funds calculated by Buona?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
tial Franchise Fee is deemed fully earned upon payment, in consideration of expenses incurred by Franchisor in granting the franchise and for Franchisor's lost or deferred opportunity to grant a franchise to others.
- 3.2 Royalty. Franchisee shall pay recurring, non-refundable royalties as follows: (i) to Chicago's Original Italian Beef Franchising LLC, a royalty in the amount of four percent (4%) of Gross Sales (as defined herein) derived from the sale of Buona products and services; and (ii) to Five Flavors Franchising, LLC, a royalty in the amount of six percent (6%) of Gross Sales derived from the sale of The Original Rainbow Cone products and services. The royalties shall be paid throughout the Term, and are payable weekly (or on such other basis as may be set forth in the Manuals or otherwise agreed to in writing by Franchisor) calculated on Gross Sales of the preceding week. Royalty fees shall be paid in the manner set forth in Section 3.5 of this Agreement or as otherwise provided for in the Manuals.
- 3.3 Marketing Fund Contribution. Recognizing the value of advertising and marketing to the goodwill and public image of the Franchised Businesses, each Franchisor will establish, maintain and administer an advertising, marketing and promotional fund (the "Marketing Fund") for such advertising, marketing and promotions as Franchisor may deem necessary or appropriate in its sole discretion. Franchisee shall contribute to each of the Marketing Funds an amount Franchisor designates up to a total of two and one-half percent (2.5%) of the Gross Sales (as defined below) of the Franchised Business arising from the sale of Buona products and services and up to a total of three percent (3%) of the Gross Sales of the Franchised Business arising from the sale of The Original Rainbow Cone products and services.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, franchisees are required to pay recurring royalties and contribute to marketing funds, with the calculations varying based on the brand (Buona or The Original Rainbow Cone). Royalties are calculated as a percentage of gross sales, with 4% of Gross Sales from Buona products and services going to Chicago's Original Italian Beef Franchising LLC, and 6% of Gross Sales from The Original Rainbow Cone products and services going to Five Flavors Franchising, LLC. These royalties are non-refundable and payable weekly, based on the previous week's gross sales.
Franchisees must also contribute to the Marketing Fund. The contribution amount is up to 2.5% of Gross Sales from Buona products and services and up to 3% of Gross Sales from The Original Rainbow Cone products and services. Buona will determine if the franchisee makes one payment distributed to each Marketing Fund based on the Gross Sales of the respective Brands or separate payments to each Marketing Fund. Buona will provide sixty days' notice before any increase or decrease in the Marketing Fund contribution. These contributions are also due weekly, aligning with the royalty fee payments.
These fees are critical for prospective franchisees to understand, as they directly impact profitability. The combined royalty and marketing fund contributions can represent a significant percentage of gross sales. Franchisees should budget accordingly and factor these ongoing costs into their financial projections. Additionally, franchisees are obligated to spend a minimum of 1% of gross sales on local advertising, further adding to marketing expenses. Understanding these financial obligations is essential for assessing the viability of a Buona franchise.