How is the royalty fee calculated for a Kidokinetics franchise?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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- Royalty Fee: "Gross Sales" means the revenues you receive from the sale of all goods, services and products sold at, from, or through the Kidokinetics Business or made pursuant to the rights granted hereunder, and all other income of every kind and nature related to the Kidokinetics Business, whether from cash or credit or otherwise, and regardless of collection in the case of credit, including the full redemption value of any gift card, gift certificate or coupon sold for use in the Kidokinetics Business (fees retained by or paid to third-party sellers of such gift cards, gift certificates or coupons are not excluded from this calculation), and all proceeds from any business interruption insurance. It does not include (i) any sales tax or other taxes collected from customers for, and turned over to, the governmental authority imposing the tax, (ii) properly documented refunds to customers, or (iii) properly documented employee discounts (limited to 3% of Gross Sales).
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- Royalty Fee: The obligation to pay Royalties begins upon completion of your initial training. You will be required to pay the greater of 8% of Gross Sales or the "Minimum Royalty" (described below). You will pay 8% of Gross Sales on a weekly basis. At the end of the month, if the Minimum Royalty amount is greater than the total weekly Royalties paid that month, you will pay us the difference in order to meet your Minimum Royalty obligation. You will receive a grace period ("Grace Period") before you are required to begin paying Minimum Royalties. The Grace Period will be for 90 days beginning on the day you successfully complete the initial training and will expire after 90 days. If you purchase multiple franchises at the same time, you will receive an increased Grace Period for your second through fourth franchises as summarized below.
The Grace Periods are as follows:
| Franchise Number | Grace Period in Months Following Grace Period | |
|---|---|---|
| Expiration | ||
| 2 | 12 months | |
| 3 | 24 months | |
| 4 | 36 months |
The "Minimum Royalty" is as follows:
| Timeframe | Minimum Royalty |
|---|---|
| First 12 months (Beginning after the Grace | $600 per month |
| Period Expiration) | $600 per month |
| Months 13 to 24 | $800 per month |
| Months 25+ | $1,000 per month |
ITEM 7.
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, the royalty fee is calculated as the greater of 8% of Gross Sales or a Minimum Royalty amount. Gross Sales includes all revenues from goods, services, and products sold through the Kidokinetics business, including income from cash, credit, and gift cards. Exclusions from Gross Sales are sales tax remitted to governmental authorities, documented customer refunds, and documented employee discounts up to 3% of Gross Sales. The royalty payment is due weekly for the percentage-based royalty. If the total weekly royalties paid are less than the Minimum Royalty for the month, the franchisee must pay the difference at the end of the month.
Kidokinetics franchisees receive a 90-day grace period after initial training before they are required to pay Minimum Royalties. If a franchisee purchases multiple franchises simultaneously, the grace period is extended for the second through fourth franchises. After the grace period, the Minimum Royalty is $600 per month for the first 12 months, $800 per month for months 13 to 24, and $1,000 per month for months 25 and beyond.
It is important to note that any fixed dollar amount fees, including the Minimum Royalty, are subject to adjustment based on changes to the Consumer Price Index (CPI) in the United States. Kidokinetics may review and increase these fees if the CPI increase is more than 5% higher than the CPI in effect either on the franchise agreement's effective date or the date of the last fee adjustment. Franchisees will receive at least 60 days' notice before any CPI-related fee adjustment becomes effective, and Kidokinetics will implement no more than one CPI-related fee adjustment per calendar year.