What royalty fee is Itan franchisees generally required to pay?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
counts payable on the balance sheets.
The Company has a licensing agreement with a related party which owns the trademarks, service marks and other marks (the "Marks") related to the iTan name and franchise. The licensing agreement provides the Company to use and sublicense the Marks to its franchise locations. The licensing agreement calls for a one-time payment of $10 by the Company to the related party.
At December 31, 2024 and 2023, the Company had $0 and $1,300,000 receivable from its stockholder. This amount was a short-term advance to the stockholder and is reflected in due from related parties on the balance sheets. The advance did not accrue interest.
NOTE 6 FRANCHISING
The Company generates revenues from franchising through individual franchise agreements. In general, the Company's franchise agreements provide for the payment of an initial franchise fee for each franchise salon opened. The franchise agreements also require the franchisees to pay the Company a royalty fee of 6% of sales, with the exception of franchises belonging to a related party (see note 5). The franchise agreements also set forth a fee based on the percentage of sales to be contributed to a marketing fund to be spent on advertising for all locations. This fee can be changed from time to time. During the year ended December 31, 2023, the marketing fund contribution rate was 4% of sales. The marketing fund contribution rate remained at 4% of sales through September 30, 2024.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, franchisees are generally required to pay a royalty fee. The standard royalty fee is 6% of sales, although this does not apply to franchises belonging to a related party.
In addition to the royalty fee, Itan franchisees must also contribute to a marketing fund. In 2023, this contribution was 4% of sales. Through September 30, 2024, the marketing fund contribution rate remained at 4% of sales. However, beginning October 1, 2024, the rate changed to a cumulative 5.5%, with 2% allocated to a general fund and 3.5% to a regional fund, depending on the franchisee's location.
Itan's franchise agreement also specifies a different royalty fee of 6.5% of Gross Sales. This royalty fee is due every Wednesday for the previous reporting period, which runs from Monday to Sunday. It is important to note that Itan may periodically change the reporting period and/or royalty fee due date through updates to the Manual.