How is the 'Imputed Royalty and Brand Fund Contributions' calculated for Cream franchises?

According to Cream's 2025 Franchise Disclosure Document, the 'Imputed Royalty and Brand Fund Contributions' is calculated as 7% of average annual Net Sales. This 7% is based on the 5% Royalty Fee and 2% Brand Fund Contribution that a franchisee would be required to pay to Cream. The FDD clarifies that these amounts were not actually paid by the corporate-owned locations used in the financial performance representation.

For a prospective Cream franchisee, this means that when evaluating the financial performance data presented in Item 19, an imputed cost of 7% of Net Sales has been factored in to represent the royalty and brand fund contributions they would be obligated to pay. This allows for a more accurate comparison of the corporate-owned store performance to what a franchisee might expect, after accounting for these fees.

It's important to note that 'Net Sales' is defined as all revenue derived from operating the Cream shops, including various forms of payment such as cash, credit cards, and gift card redemptions, net of authorized discounts, but excluding sales taxes and employee tips. Therefore, the 7% is applied to this specific calculation of Net Sales to determine the Imputed Royalty and Brand Fund Contributions. This imputed cost is then used in calculating 'Net Profit,' which is Gross Profit less Total Operating Expenses, Royalty, and Brand Fund Contributions.