What is the minimum monthly royalty fee for a Deka Lash franchise after the second year of operations?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
e (12) months after you execute this Agreement, regardless of when you actually open. If this agreement is signed as the second or subsequent unit in an Area Development Agreement, royalties begin the date you sell your first paid product, service, or membership ("Location Start Date").
- b) Royalty Amount. From the time of your Royalty Start Date until the end of
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, franchisees are required to pay a royalty fee. From the royalty start date until the end of the agreement term, the royalty fee is the greater of 6% of gross revenue or a fixed monthly amount.
Initially, the minimum monthly royalty fee is $600. However, after the second year of operations, the minimum monthly royalty fee increases to $1,000. This means that even if 6% of a Deka Lash franchisee's gross revenue is less than $1,000, they must still pay a minimum of $1,000 as the royalty fee each month.
This escalating minimum royalty fee is a significant factor for prospective franchisees to consider. It means that as the business matures, the royalty obligation increases, regardless of revenue fluctuations. Franchisees need to ensure their business model can sustain this increased cost to maintain profitability. It is common in the franchise industry for royalty fees to be a percentage of gross revenue, but the inclusion of a minimum payment ensures the franchisor receives a consistent income stream, irrespective of the franchisee's sales performance.