Are there any Lees Famous Recipe franchisees who do not pay royalties?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
-authorized bank draft authorization ("ACH") where noted.
- 2. Royalty. Except as noted below, the 5% Royalty is currently uniform for all persons buying a Traditional Standalone, Streamlined, or Non-Traditional franchise. In 2008, LFR Inc., entered into license agreements with the LFR Licensees, under which the LFR Licensees were not required to pay royalties. As of the date of this Franchise Disclosure Document, there are currently 71 LFR Licensees, all of whom do not pay royalties.
- 3. Gross Sales. "Gross Sales" is defined as the total amount of all revenues from whatever source derived (whether in the form of cash, credit, insurance proceeds for lost sales covered by business interruption insurance, agreements to pay or other consideration, and whether or not payment is received at the time of sale or any such amounts prove uncollectible) which arise from or are derived by you or by any other person from business conducted or which originated in, on, from or through your Lee's Famous Recipe Restaurant location, or from the sale of any products or services associated with the use of the Marks, including sales from vending machines, deliveries, and catering sales, but excluding sales tax or any similar taxes which are required by law to be computed separately and paid by a customer.
- 4. Brand Cooperative Advertising Fund Fee. The advertising fee is used to defray the cost of producing and/or purchasing radio, television, internet, social media or printed advertising
materials as we deem necessary on a national, regional or local basis. You must pay this fee to us or to our designee by ACH. We may adjust the amount of the Brand Cooperative Advertising Fund Fee upon sixty (60) days' notice to you, provided the Brand Cooperative Advertising Fund Fee may not exceed four percent (4%) of Gross Sales.
Source: Item 6 — OTHER FEES (FDD pages 15–21)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, some franchisees do not pay royalties. Specifically, in 2008, LFR Inc. entered into license agreements with a group referred to as the "LFR Licensees," which exempted them from paying royalties. As of the date of the 2025 FDD, there are 71 such LFR Licensees who are not required to pay royalties.
In addition to the royalty exemption, the 71 LFR Licensees also benefit from other financial concessions. They are not required to participate in or pay fees to any local, regional, or national advertising cooperative. Furthermore, these licensees are not obligated to make local advertising expenditures, which are otherwise recommended to be at least 1% of gross sales weekly.
For a prospective franchisee, this information highlights that franchise terms can vary significantly within the Lees Famous Recipe system. It is crucial to understand the specific terms and conditions applicable to new franchisees compared to those grandfathered in under older agreements. A potential franchisee should inquire about the reasons for these different agreements and whether similar opportunities for modified terms exist.