What is the minimum monthly royalty fee for each Extreme Art Studio Business?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
eferred opportunity to enter into this Franchise Agreement with others, and it also offsets some of our expenses for franchisee recruitment.
3.2 ROYALTY FEE.
- 3.2.1 You agree to pay us a recurring royalty fee ("Royalty") for each calendar month (or other accounting period that we may designate from time to time). The amount of the Royalty will be equal to the greater of: (i) eight percent (8%) of your Gross Sales from all of your Extreme Art Studio Businesses for the previous calendar month (or other accounting period we designate); or (ii) $500 per month for each Extreme Art Studio Business you operate under this Franchise Agreement ("Minimum Royalty"). The Minimum Royalty shall begin being charged by us 6 months after you open your first Extreme
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, franchisees must pay a royalty fee for each calendar month. This royalty is calculated as the greater of two options. The first option is 8% of the Gross Sales from all Extreme Art Studio Businesses for the previous month. The second option is a minimum royalty of $500 per month for each Extreme Art Studio Business operated under the Franchise Agreement.
This minimum royalty payment begins six months after the franchisee opens their first Extreme Art Studio Business. For each subsequent Extreme Art Studio Business opened under a Standard Franchise, the minimum royalty is charged immediately upon opening.
For a prospective franchisee, this means that even if sales are low in the initial months, they will still be responsible for paying the minimum royalty fee of $500 per month per location after the first six months of operation for the first location. This could impact the franchisee's profitability, especially during slower months or the early stages of business operation. It is important to factor this minimum payment into financial projections and ensure sufficient capital is available to cover this expense.