How are franchise royalties calculated for a Pearce Bespoke franchise?

According to Pearce Bespoke's 2025 Franchise Disclosure Document, the franchise royalties are calculated as either 10% of the franchisee's gross revenue or a minimum weekly fee, whichever is greater. During the first year of operation, the minimum weekly royalty is $100. This minimum increases to $150 per week in the second year. From the third year onwards, the minimum weekly royalty is $200.

This royalty structure means that Pearce Bespoke franchisees need to carefully consider their projected sales volume. If a franchisee's gross revenue is low, they will still be required to pay the minimum weekly royalty fee, which could impact their profitability, especially in the initial years. Conversely, if a franchisee's gross revenue is high, their royalty payment will be based on the 10% calculation, potentially exceeding the minimum weekly fee.

The weekly collection of royalties is a common practice in franchising, allowing for a consistent revenue stream for Pearce Bespoke and requiring franchisees to manage their cash flow accordingly. The increasing minimum royalty fee over the first three years suggests that Pearce Bespoke expects franchisees to grow their businesses and increase their revenue over time. This structure incentivizes franchisees to focus on sales growth to ensure that the 10% of gross revenue exceeds the minimum weekly payments, maximizing their profitability.

Prospective Pearce Bespoke franchisees should analyze their potential market and projected sales carefully to understand how the royalty structure will affect their financial performance. It is important to factor in the increasing minimum royalty fees when developing a business plan and financial projections to ensure the franchise is financially viable.