What is the basis for calculating the Deka Lash Royalty Fee?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
| Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty (Notes 1 and 2) | 6% of Gross Studio Sales or $600 per month, whichever is greater. After your 1 st year of operations, the minimum Royalty Fee increases to $1,000 per month. | As specified in the operations manual. Currently we collect royalties twice a month on the 5 th day following the end of each semi-monthly period. |
Note 2. Gross Studio Sales or Gross Revenue. "Gross Studio Sales" or "Gross Revenue" includes all revenue generated from the operation of the Franchise from whatever source derived and means the total Revenue for any calendar month or other accounting period specified in the Operations Manual. "Gross Revenue" includes, but is not limited to sales, memberships, prepaid programs, rentals, products, apparel, gear, vending, exchanges, services, labor, service charges, gross sales on deal sites (including Groupon and Living Social) attributed to your franchise, service contracts, any other type of remuneration, gift, contra-deal, barter of products or services, charity, payment in kind, or any other benefit or value that is received or deferred to be received. Gross Revenue does not include sales tax, returned merchandise and isolated sales of furniture or fixtures. Credit transactions will be included in Revenue as of the date of the transaction without deduction for uncollected credit accounts. The proceeds from any business interruption insurance or eminent domain recovery you receive will be included in Gross Revenue.
Note 3. Should a franchisee breach a Franchise Agreement and close a studio, all fees are still mandatory. This means that a breaching franchisee will still be required to pay the monthly technology fees and minimum royalties for the remaining life of the Franchise Agreement.
Source: Item 6 — OTHER FEES (FDD pages 15–23)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the royalty fee is calculated as 6% of Gross Studio Sales or $600 per month, whichever is greater. After the first year of operations, the minimum royalty fee increases to $1,000 per month.
Gross Studio Sales, also referred to as Gross Revenue, encompasses all revenue generated from the franchise, irrespective of the source. This includes sales, memberships, prepaid programs, rentals, products, apparel, gear, vending, exchanges, services, labor, service charges, gross sales on deal sites like Groupon and Living Social attributed to the franchise, service contracts, and any other form of remuneration, gift, contra-deal, barter of products or services, charity, payment in kind, or any other benefit or value received or deferred.
However, Gross Revenue does not include sales tax, returned merchandise, and isolated sales of furniture or fixtures. Credit transactions are included in revenue as of the transaction date, without deductions for uncollected credit accounts. Proceeds from business interruption insurance or eminent domain recovery are also included in Gross Revenue. Deka Lash requires franchisees to authorize automatic bank drafts for royalty payments via ACH electronic funds transfer.
It's important to note that even if a franchisee breaches the Franchise Agreement and closes their studio, they are still obligated to pay all fees, including monthly technology fees and minimum royalties, for the remaining term of the Franchise Agreement. This means that even a non-operating Deka Lash franchise could still incur significant royalty obligations.