Is there a maximum amount for the Royalty fee that Extreme Art Studio can charge?
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 ("Minim |
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 the greater of 8% of Gross Sales or $500 per month. This means that Extreme Art Studio franchisees will pay a royalty fee based on their gross sales, but they are guaranteed to pay at least $500 each month.
For a prospective franchisee, this means that even if sales are low in a particular month, they will still owe a minimum royalty of $500. If 8% of gross sales exceeds $500, then the franchisee will owe the higher amount. Gross Sales includes all revenue received from operating the Extreme Art Studio Business, including cash, checks, credit and debit card payments, barter exchanges, trade credits, proceeds from business interruption insurance, gift card redemptions, and any other revenue derived. Gross Sales does not include any federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, or any customer tips.
It is important to note that the Royalty fee is ongoing throughout the term of the franchise agreement. Franchisees should carefully consider their projected gross sales and ensure they can comfortably meet the minimum royalty payment, especially during the initial months of operation when sales may be lower. The FDD does not specify a maximum royalty fee, so the royalty payment will increase as gross sales increase. This is a common structure in franchising, as it aligns the franchisor's income with the franchisee's success.