What was the revenue from royalties for Cinch I.T. in 2021?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
| 2021 | Restated 2020 | ||||
|---|---|---|---|---|---|
| REVENUE | |||||
| Franchise sales | 5 | 39,625 | S | 16,000 | |
| Advertising | 83,241 | 65,298 | |||
| Annual conference | 26,600 | ||||
| Royalties | 257,946 | 207.393 | |||
| Training | 142,500 | 45,000 | |||
| TOTAL REVENUE | - | 523,312 | 1 | 360,291 |
Cinch IT. Inc., a related party, purchased a franchise from the Company. Per the franchise agreement, the franchisee pays a royalty of 5 to 7 percent of its gross sales and an advertising fee of 1,5 percent of its gross sales. During the years ended December 31, 2022, the Company collected royalty fees of $187,724 and advertising fees of $56,326 from the related party. During the year ended December 31, 2021, the Company collected royalty fees of $157,390 and advertising fees of $42,983 from the related party.
During the years ended December 31, 2022 and 2021, the Company also collected annual conference fees of $1,400 and $3,500, respectively from this related party.
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, the company's revenue from royalties in 2021 was $257,946. This figure represents the income Cinch I.T. received from its franchisees based on a percentage of their gross sales. Additionally, Cinch I.T. collected $157,390 in royalty fees from a related party franchisee during the same year.
For a prospective Cinch I.T. franchisee, understanding the royalty revenue is crucial as it reflects the financial health and stability of the franchisor. A consistent and growing royalty revenue stream can indicate a successful and well-supported franchise system. It also demonstrates the brand's ability to generate income from its franchisees' operations.
Furthermore, the FDD mentions that a related party franchisee paid royalty fees of $157,390 in 2021. Related party transactions are important for franchisees to note, as they could potentially impact the overall financial performance and transparency of the franchise system. It is essential to understand the terms and conditions of these transactions and how they might affect the franchisee's own business.
In addition to royalties, Cinch I.T. also generates revenue from advertising fees and annual conference fees. In 2021, advertising revenue totaled $83,241, and the company collected $3,200 and $3,500 in annual conference fees from related parties. These additional revenue streams contribute to the overall financial picture of the franchisor and can provide further insights into the franchise's business model.