What sales data is used to calculate Royalties and Brand Fund Contributions for a Cream franchise that has been operating for at least 12 months?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
If we terminate this Agreement because of your breach or if you terminate this Agreement without cause, you and we agree that it would be difficult, if not impossible, to determine the amount of damages that we would suffer due to the loss or interruption of the revenue stream we otherwise would have derived from your continued payment of Royalties, and that the Brand Fund would have otherwise derived from your continued contributions to those funds, through the remainder of the Term. Therefore, you and we agree that a reasonable estimate of such damages, less any cost savings we might have experienced (the "Lost Revenue Damages") is an amount equal to the net present value of the Royalties and Brand Fund Contributions that would have become due had this Agreement not been terminated, from the date of termination, to the earlier of (1) the 2nd anniversary of the termination date; or (2) the scheduled expiration of the Term. For the purposes of this Section, Royalties and Brand Fund Contributions will be calculated based on the average monthly Net Sales of your Shop during the 12 full calendar months immediately preceding the last date of regular operations of your Shop; provided, that if as of such date your Shop has not been operating for at least 12 months, Royalties and Brand Fund Contributions will be calculated based on the average monthly Net Sales of all Jeni's Ice Creams Scoop Shops operating under the Marks during our last fiscal year.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, if the franchise agreement is terminated due to a breach by the franchisee or terminated by the franchisee without cause, the calculation of Royalties and Brand Fund Contributions will be based on the average monthly Net Sales of the shop. This calculation uses the 12 full calendar months immediately preceding the last date of regular operations, assuming the shop has been operating for at least 12 months.
This stipulation is important because it determines the basis for calculating lost revenue damages if the franchise agreement is terminated prematurely. The franchisor uses this calculation to estimate the royalties and brand fund contributions they would have received had the agreement continued. This ensures Cream is compensated for the anticipated revenue stream lost due to the termination.
For a prospective franchisee, this means that their past sales performance directly impacts the financial consequences of early termination. Strong sales figures over the preceding 12 months will result in a higher estimate of lost royalties and brand fund contributions, potentially increasing the financial burden if the agreement is broken. Conversely, if the Cream shop has not been operating for at least 12 months, the calculation will be based on the average monthly Net Sales of all Jeni's Ice Creams Scoop Shops operating under the Marks during our last fiscal year.