When are Hyper Kidz franchisees required to report their Gross Sales to the franchisor?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
The Royalty Fee and Brand Development Fee will be withdrawn from your designated bank account by electronic funds transfer ("EFT") on Tuesday of each week based on Gross Sales for the preceding week ending Sunday. On Monday of each week, you must report to us your Gross Sales for the previous week ending Sunday. If you do not report Gross Sales, we may debit your account for 120% of the last Royalty Fee and Brand Development Fee that we debited. If the Royalty Fee and Brand Development Fee we debit are less than the Royalty Fee and Brand Development Fee you actually owe us, once we have been able to determine the true and correct Gross Sales for your Franchised Business, we will debit your account for the balance on a day we specify. If the Royalty Fee and Brand Development Fee we debit are greater than the Royalty Fee and Brand Development Fee you actually owe us, we will credit the excess against the amount we otherwise would debit from your account for the next payment due.
Source: Item 6 — OTHER FEES (FDD pages 10–15)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, franchisees must report their Gross Sales to Hyper Kidz on a weekly basis. Specifically, franchisees are required to report their Gross Sales for the previous week, which ends on Sunday, to Hyper Kidz every Monday. This information is used to calculate the Royalty Fee, which is 6% of Gross Sales, and the Brand Development Fee, which is 2% of Gross Sales. Both fees are then withdrawn from the franchisee's designated bank account via electronic funds transfer (EFT) every Tuesday.
It is important for prospective Hyper Kidz franchisees to note that failure to report Gross Sales on time can result in penalties. If a franchisee does not report their Gross Sales by the Monday deadline, Hyper Kidz has the right to debit the franchisee's account for 120% of the last Royalty Fee and Brand Development Fee that was debited. This serves as an incentive for franchisees to report their sales accurately and on time.
Hyper Kidz also has the right to audit a franchisee's records if they suspect that Gross Sales have been understated. If an audit reveals that the franchisee has understated Gross Sales by 2% or more, the franchisee will be responsible for covering the cost of the audit, in addition to paying the understated amount plus interest. This policy underscores the importance of maintaining accurate records and reporting Gross Sales honestly.
This weekly reporting and payment structure is fairly common in the franchise industry, as it allows franchisors to maintain a consistent cash flow and monitor the performance of their franchisees. However, prospective Hyper Kidz franchisees should carefully consider the implications of this system and ensure that they have the necessary systems and procedures in place to accurately track and report their Gross Sales on a timely basis.