When is the royalty fee due for a Chatime franchise, based on the Gross Sales of the previous month?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Fee(1) Type of | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty | 5.0% of Gross Sales | Tenth day of the month calculated based on the Gross Sales of the previous month | "Gross Sales" means the total actual gross charges for all products, merchandise, and services sold to your Store's customers for cash or credit, whether such sales are made at or from the premises of your Store or any other location or other channels of distribution if approved in writing in advance by us and including proceeds from any business interruption or similar insurance coverage, but excluding (i) sales, use, service, or excise taxes collected from customers and paid to the appropriate taxing authority and (ii) all customer refunds, adjustments and promotional discountsincluding any senior citizens discount. |
Source: Item 6 — Other Fees (FDD pages 13–17)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the royalty fee is due on the tenth day of each month. This fee is calculated as 5.0% of the Gross Sales from the previous month. Gross Sales include the total charges for all products, merchandise, and services sold, whether the sales are made at the store, from another location, or through other distribution channels approved in writing by Chatime. It also includes proceeds from any business interruption or similar insurance coverage.
However, the definition of Gross Sales excludes sales, use, service, or excise taxes collected from customers and paid to the appropriate taxing authority. It also excludes all customer refunds, adjustments, and promotional discounts, including any senior citizens discount. This means that Chatime franchisees only pay royalties on the net sales they actually retain, after accounting for taxes, refunds, and discounts.
This arrangement is fairly standard in the franchise industry, where royalty fees are typically calculated as a percentage of gross sales. The monthly payment schedule allows Chatime to receive a consistent revenue stream, while also ensuring that franchisees pay royalties based on their actual sales performance. Franchisees need to maintain accurate records of their gross sales, deductions, and tax payments to ensure accurate royalty reporting and avoid potential audits.