How are royalties calculated for Craters & Freighters franchisees?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties, including franchisee contributions to advertising funds, represent sales-based royalties and are calculated as a percentage of net sales reported by franchisees and recognized over time as franchisee sales occur. These revenues are presented within "royalties" and expenses incurred to provide these services are included within "franchisee support." Regarding advertising funds, under the new revenue standard, the Company has determined it acts as a principal of the franchisee advertising transactions, thus, revenue and expense are presented gross. These revenues are presented within "franchise revenues" and expenses incurred to provide these services are included within "advertising." When revenues of an advertising program exceed the related advertising expenses, advertising costs are accrued up to the amount of revenues on an annual basis.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to Craters & Freighters's 2025 Franchise Disclosure Document, royalties, including franchisee contributions to advertising funds, are calculated as a percentage of net sales reported by franchisees. These royalties are sales-based and recognized over time as franchisee sales occur. The revenues from royalties are presented within "royalties," while the expenses incurred to provide services related to these royalties are included within "franchisee support."
In addition to royalties, Craters & Freighters also collects contributions to advertising funds from franchisees. These contributions are also calculated as a percentage of net sales. The company has determined that it acts as a principal in these advertising transactions, meaning that both the revenue and expenses are presented gross. The revenues from advertising funds are presented within "franchise revenues," and the expenses incurred to provide these services are included within "advertising."
For a prospective Craters & Freighters franchisee, this means that a portion of their gross sales will be remitted to the franchisor as royalties and advertising fees. The exact percentage is not specified in this excerpt, but it is important for potential franchisees to understand that these fees are ongoing and directly tied to their sales volume. It is also important to note that advertising costs are accrued up to the amount of revenues on an annual basis, meaning that if advertising revenues exceed expenses, the excess funds are carried over.