How is the Royalty Fee calculated for a Degree Wellness franchise, based on the definition of 'Gross Sales'?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
/0 | 14,441 | | Net Income Adjusted, Investor | 73,300 | 40.4% | 46,849 | 34.1% | 37,520 | 24.0% | 58,477 | 36.9% 1/2 | 46,849 |
Explanatory Notes to Tables 1 and 2
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- Gross Sales means all gross receipts, less tips and sales tax and represents the amount upon which will base your Royalty Fee, Local Advertising Requirement and Fund Contribution under your Franchise Agreement with us.
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Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 60–63)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the Royalty Fee is calculated as 7% of Gross Sales. Gross Sales are defined as all gross receipts, less tips and sales tax. This amount is the base upon which Degree Wellness calculates the Royalty Fee, Local Advertising Requirement, and Brand Fund contribution.
For a prospective Degree Wellness franchisee, this means that the royalty payments are directly tied to the revenue generated by the studio, after deducting tips and sales tax. The franchisee will pay 7% of this adjusted gross revenue to Degree Wellness as a royalty fee. This fee structure is common in franchising, where royalties are typically a percentage of gross sales, incentivizing the franchisor to support the franchisee's revenue growth.
For example, in 2024, Studio 1 had gross revenue of $738,070, while Studio 2 had gross revenue of $482,725. The estimated royalties for these studios were $51,665 and $33,791, respectively, both calculated at 7% of gross sales. Similarly, in the first quarter of 2025, royalties for Studio 1 were $12,702, calculated from a gross revenue of $181,459.
It is important for potential franchisees to understand what constitutes Gross Sales, as this figure directly impacts the royalty fees owed to Degree Wellness. Franchisees should also factor in the Local Advertising Requirement and Brand Fund contribution, which are also calculated based on Gross Sales, when projecting their potential earnings.