How are royalties remitted to GMI for Gokhale Method classes if the payment is collected by GME?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
Nature of products and services: The Company derives its revenues primarily from royalties, franchise fees, and continuing education classes for franchisees.
Royalty revenue pertains to a pre-determined amount or percentage for each course taught based on the type of course taught and the number of participants. For royalties, revenue is recognized when students participate in the class. For many of these classes, the payment is processed or collected by GME or the teacher. If the payment is collected by GME, the royalties due to GMI on these classes are periodically remitted to GMI by GME. If the payment is collected by the teacher, GMI will record revenue for the net royalty due.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, when Gokhale Method Enterprises, Inc. (GME) collects payments for classes, the royalties owed to Gokhale Method Institute, Inc. (GMI) are periodically remitted to GMI by GME. This process applies to many classes where GME handles the payment processing or collection.
For a Gokhale Method franchisee, this means that if GME collects the class fees, the franchisee does not directly remit the royalty to GMI. Instead, GME is responsible for periodically transferring the royalty amount to GMI. This arrangement simplifies the royalty payment process for franchisees in cases where GME manages the payment collection.
In contrast, if the class payment is collected directly by the Gokhale Method teacher (the franchisee), GMI will record revenue for the net royalty due. This implies that the franchisee is responsible for calculating and reporting the royalty amount to GMI, who will then record the revenue accordingly. The FDD also mentions that if the payment is collected by the teacher, GMI will create an invoice for the net royalty in another section.
Therefore, the method of royalty remittance depends on who collects the payment for the Gokhale Method classes. If GME collects the payment, they remit the royalties to GMI. If the franchisee collects the payment, they are responsible for the royalty, and GMI will record the revenue or create an invoice for the net royalty due.