How often are the Hyper Kidz royalties billed to franchisees?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
Revenues related to the designated NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition, Non-refundable Deferred Franchise Fees, and Franchise Acquisition Assets (continued)
territory and IP are continuing royalties that are 6.0% of gross revenues. These revenues will be used to continue the development of the Company's brand, the franchise system and provide on-going support for the Company's franchisees. The royalties are billed weekly and are recognized as revenue when earned.
Revenue from initial franchise fees is allocated to the performance obligations in the franchise agreement that are distinct from the territory rights and symbolic intellectual property. The amount allocated to each identified performance obligation is determined using the expected cost plus a margin or fair market value approach. Revenue from initial fees is recognized when the performance obligation is satisfied and control of the good or service has been transferred to the franchisee. Unearned initial fee revenues will be recorded as non-refundable deferred revenue. Commissions and other direct costs related to unsatisfied performance obligations will be recorded as a franchise acquisition asset and are recognized as expense when the related performance obligation has been satisfied.
Brand Fund Contribution
Contributions to the brand fund are 1% of gross revenue. Contributions are billed weekly and recognized as revenue when earned. The Company had no contributions to the brand fund during the years ended December 31, 2022, 2021, and 2020.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, franchisees are billed for royalties on a weekly basis. The royalty fee is 6.0% of gross revenues. These royalty payments contribute to the continued development of the Hyper Kidz brand, the franchise system, and ongoing support for franchisees.
In addition to royalties, Hyper Kidz franchisees also contribute to the brand fund. These contributions are 1% of gross revenue and are also billed weekly. The brand fund is used for the development of the Hyper Kidz brand.
The weekly billing of both royalties and brand fund contributions means that franchisees need to maintain careful and consistent tracking of their gross revenues to ensure accurate and timely payments. This frequency of billing may impact a franchisee's cash flow management, requiring them to allocate funds for these payments each week.