What is the purpose of the royalty fee paid to Engineering For Kids?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
3.2. Royalty
3.2.1. You must pay us an ongoing royalty fee ("Royalty") in an amount equal to the greater of (a) the Gross Sales for the Period (as defined in Section 3.2.2 below) multiplied by the Applicable Royalty 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, the royalty fee is for the franchisee's right to use the Engineering For Kids' Proprietary Marks and System. The royalty fee is not in exchange for any specific services that Engineering For Kids renders to the franchisee.
The franchisee must pay Engineering For Kids an ongoing royalty fee, which is the greater of either the Gross Sales for the Period multiplied by the Applicable Royalty Rates for that Period, or the monthly Minimum Royalty applicable for such month. The franchisee determines the Applicable Royalty Rate for each Period and calculates the royalty due based on the Gross Sales reported to Engineering For Kids for that period.
To qualify for reduced Applicable Royalty Rates, the franchisee must comply with the royalty and brand fund contribution requirements. This means that if a franchisee fails to meet these requirements, they may be subject to a higher royalty rate, impacting their overall profitability. Franchisees should ensure they understand and can consistently meet these obligations to maximize their earnings.