How do Engineering For Kids franchisees determine the Applicable Royalty Rate for each period?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
alty Rate(s) (as defined in Section 3.2.1.1 below) for that Period; or (b) the monthly "Minimum Royalty" applicable for such month (as defined in Section 3.2.1.2 below). The Royalty is for your right to use the Proprietary Marks and the System under this Agreement, and not in exchange for any specific services we render.
3.2.1.1. The rates used in calculating the Royalty payments during the Term are the percentage rates listed below (the "Applicable Royalty Rates"), which are applied based on the Gross Sales of your Franchised Business during each Period. You will determine the Applicable Royalty Rate(s) for each Period, and calculate the Royalty due, based on the Gross Sales that you are reporting to us for that Period. To qualify for the reduced Applicable Royalty Rates, you must be in compliance with your Royalty and Brand Fund Contribution requirements.
Source: Item 23 — RECEIPTS (FDD pages 53–138)
What This Means (2025 FDD)
According to Engineering For Kids' 2025 Franchise Disclosure Document, franchisees determine their Applicable Royalty Rate for each period based on their Gross Sales during that period. The franchisee calculates the royalty due based on the Gross Sales reported to Engineering For Kids.
The Applicable Royalty Rates are percentage rates that vary depending on the Gross Sales of the Franchised Business during each period. For example, the FDD provides an example where if reported Gross Sales in a Period are between $0 and $25,000, then the Applicable Royalty Rate is 7%. If reported Gross Sales in a Period are above $25,000 but less than $50,000, then the Applicable Royalty Rates are 7% for the first $25,000 and 6% for all additional Gross Sales between $25,000.01 and $50,000.
To qualify for any reduced Applicable Royalty Rates, the franchisee must be in compliance with their Royalty and Brand Fund Contribution requirements. This means that franchisees need to ensure they are meeting their financial obligations to Engineering For Kids to take advantage of any potential royalty rate reductions.
It is important for prospective Engineering For Kids franchisees to understand how these rates are structured, as it directly impacts their profitability. Understanding the thresholds and the requirements for compliance is crucial for financial planning and operational success.