What revenues contribute to the accounts receivable for Christian Brothers Automotive franchisees?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
After the end of the Split Profits Review Period, Franchisee must pay Franchisor a royalty fee each month calculated as follows:
(a) From the date of this Agreement until the end of the Initial Term and each subsequent term thereafter, an amount equal to fifty percent (50%) of the "Split Profits" (as defined below).
(b) "Split Profits" shall mean (x) all monies, revenues and items of value from all sources generated in connection with and/or in any way related to the Franchised Business, minus (y) the Approved Expense Items (as defined below). "Approved Expense Items" shall mean (i) those expense items calculated under Generally Accepted Accounting Principles (GAAP) and approved by Franchisor as set forth in the Confidential Operations Manual, (ii) all subsequent written budget adjustments that are approved in writing by Franchisor, and (iii) all adjustments
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
Based on the 2025 Christian Brothers Automotive Franchise Agreement, the revenues that contribute to the accounts receivable are defined within the context of calculating "Split Profits." Split Profits are defined as all monies, revenues, and items of value from all sources generated in connection with, or in any way related to, the franchised business, minus approved expense items. These revenues are central to determining the royalty fees franchisees owe to Christian Brothers Automotive.
Specifically, the agreement stipulates that franchisees pay Christian Brothers Automotive a royalty fee each month, calculated as 50% of the Split Profits. Approved Expense Items are those calculated under Generally Accepted Accounting Principles (GAAP) and approved by Christian Brothers Automotive, as detailed in the Confidential Operations Manual, including any subsequent written budget adjustments approved by Christian Brothers Automotive.
For a prospective franchisee, understanding what constitutes revenue and what qualifies as an approved expense is crucial. This understanding directly impacts the calculation of Split Profits and, consequently, the monthly royalty fees. Franchisees need to be diligent in documenting all revenue streams and adhering to GAAP when calculating expenses to ensure accurate royalty payments. Furthermore, franchisees must seek and obtain written approval from Christian Brothers Automotive for any budget adjustments to ensure these are recognized as Approved Expense Items, which will reduce the total Split Profits subject to royalty fees.