What does the $217,105 favorable royalty contract represent for Monicals Pizza?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
n in August 2015 from a franchisee, the Company has recorded a favorable royalty contract of $217,105. This asset represents the present value of estimated royalty fees that could be collected in excess of the present value of the royalty fees being collected by the existing franchisee. The asset is being amortized over 25 years, the remaining life of the existing franchise agreement at the date of the purchase. Amortization expense related to the favorable royalty contract was $8,684 for the years ended December 31, 2024 and 2023.
Amortization expense related to the favorable royalty contrac
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the company recorded a favorable royalty contract of $217,105 in connection with the purchase of the Paris, Illinois location in August 2015 from a franchisee. This asset represents the present value of estimated royalty fees that Monicals Pizza could collect above the royalty fees being collected by the existing franchisee at the time of purchase.
Monicals Pizza is amortizing this asset over 25 years, which is the remaining life of the existing franchise agreement from the purchase date. This means that the initial value of $217,105 is being systematically expensed over that 25-year period. The amortization expense related to this contract was $8,684 for the year ended December 31, 2024, and $8,683 for the year ended December 31, 2023.
For a prospective franchisee, this information provides insight into how Monicals Pizza manages its financial assets and obligations. The existence of a favorable royalty contract indicates that Monicals Pizza is actively involved in managing and optimizing its revenue streams from franchise locations. Understanding the amortization schedule and the initial value of such contracts can help a franchisee assess the financial health and strategies of the franchisor.