How is the Royalty fee calculated for an Extreme Art Studio franchise, and what is the minimum amount?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
OTHER FEES**
| Type of Fee(1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty(2) | The greater of 8% of Gross Sales ("Royalty") or $500 per month ("Minimum Royalty") | Within five days after the end of the calendar month | The Royalty is based on "Gross Sales" during the previous month. Gross Sales are defined in Note 2. You must pay your Royalty via electronic funds transfer ("EFT"), or such other manner we may prescribe. The Minimum Royalty begins six months after you open your first Extreme Art Studio Business and immediately after you open additional Extreme Art Studio B |
Source: Item 6 — OTHER FEES (FDD pages 13–18)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the royalty fee is calculated as the greater of 8% of Gross Sales or a minimum of $500 per month. Gross Sales include all revenue received from operating the Extreme Art Studio Business, including cash, checks, credit and debit card payments, barter exchanges, trade credits, and proceeds from business interruption insurance. Gross Sales are considered received when the products or services are delivered or rendered, or when the sale takes place, whichever comes first.
The 8% royalty is calculated from the franchisee's Gross Sales during the previous month and is due within five days after the end of each calendar month. Franchisees must pay their royalty via electronic funds transfer (EFT) or another method prescribed by Extreme Art Studio. The minimum royalty of $500 per month begins six months after the franchisee opens their first Extreme Art Studio Business and immediately after opening any additional locations.
For a prospective Extreme Art Studio franchisee, this means that even if their sales are low in the initial months, they will still need to pay the minimum royalty fee after the first six months of operation. If sales are strong, the royalty will be 8% of Gross Sales. It is important for franchisees to accurately track and report their Gross Sales, as these figures directly impact the royalty fees owed to Extreme Art Studio. Understanding the definition of Gross Sales is also crucial to ensure accurate royalty payments.