How does My Salon Suite recognize revenue from royalties?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties are generally based on a percent of franchisee sales differing by brand ranging from 2% to 8% and are recognized at the time the underlying franchisee's sales occur. Advertising fund revenue for all brands other than FII are included in royalty revenue. The FASTSIGNS National Advertising Fund is a standalone entity owned solely by the FASTSIGNS franchisees and is therefore not included in the accompanying consolidated statement of operations.
Source: Item 17 — (r) of the FDD and Section 13 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which Franchisee must agree. The Commissioner has held that covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. The FDD and the Franchise Agreement are amended accordingly to the extent required by law. (FDD pages 230–274)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, royalties are recognized at the time the underlying franchisee's sales occur. These royalties are based on a percentage of the franchisee's sales, and the percentage differs by brand, ranging from 2% to 8%. For all brands other than FII, advertising fund revenue is included in the royalty revenue. The FASTSIGNS National Advertising Fund is a standalone entity owned solely by the FASTSIGNS franchisees and is therefore not included in the accompanying consolidated statement of operations.
For a prospective My Salon Suite franchisee, this means that a portion of their gross sales will be remitted to the franchisor as royalties. The exact percentage will depend on the specific brand. It is important to note that advertising fees may be included in the royalty revenue, except in the case of FII. The franchisee should clarify the specific royalty rate and what it includes during their due diligence process.
This revenue recognition method is standard practice in the franchise industry, where franchisors typically collect royalties based on a percentage of gross sales. This arrangement aligns the franchisor's interests with the franchisee's success, as the franchisor benefits directly from increased sales at the franchise location. Franchisees should carefully review the FDD and franchise agreement to fully understand the royalty structure and payment terms.