How does City Wide calculate royalties from franchisees?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties from franchisees are calculated as defined in the franchise agreements as a percentage of monthly franchisee gross sales over the term of the franchise agreement. The franchise agreement royalties represent salesbased royalties and are related entirely to the Company's performance obligation under the franchise agreement. Contract consideration pertaining to royalties are not estimated at contract inception, instead royalties are recognized as franchisee sales occur in accordance with the sales-based royalty methodology of revenue recognition.
The Company also offers annual royalty rebate programs where franchisees may earn rebates based on franchisee gross sales during a calendar year. When rebate thresholds are achieved, the rebate is recognized as contrarevenue. Rebate programs are measured on an annual basis, in line with the Company's fiscal year.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, royalties are calculated as a percentage of the franchisee's monthly gross sales over the term of the franchise agreement. These royalties are directly tied to City Wide's performance obligations under the franchise agreement.
The FDD specifies that City Wide does not estimate royalty amounts at the beginning of the contract. Instead, royalties are recognized as franchisee sales occur, following a sales-based royalty methodology for revenue recognition. This means the royalty payment is directly proportional to the revenue generated by the franchisee.
City Wide also offers annual royalty rebate programs. Franchisees can earn rebates based on their gross sales during a calendar year. When a franchisee achieves certain sales thresholds, the rebate is recognized as a reduction of revenue. These rebate programs are evaluated annually, aligning with City Wide's fiscal year. This provides an incentive for franchisees to increase their sales volume, potentially lowering their effective royalty rate through rebates.