What rights does Pearce Bespoke grant to a franchisee when they purchase a franchise?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Pearce Bespoke Franchising, LLC ("Company") was incorporated on November 5, 2021, in the State of North Carolina as a Limited Liability Company. The Company grants franchises to qualified persons to operate a Pearce Bespoke franchised business from which the franchisee will sell quality custom clothing and accessories.
When a franchisee purchases a franchise, the Company grants the franchisee the right to use the proprietary methods, techniques, trade dress, trademarks, and logos ("the license") for a specific period of time and in a specific territory. The license is symbolic intellectual property. Revenues related to the license are continuing royalties of 10% of gross sales, subject to a minimum royalty as defined in the franchise agreement. Royalty revenues are compensation for the use of the license in the territory, over the term of the contract, and will be used in part to continue the development of the Company's brand, the franchise system and provide on-going support for the Company's franchisees.
The initial fees are paid in consideration of the rights granted in the franchise agreement and are non-refundable. The initial fees are recognized as revenue over the term of the initial franchise agreement, which is ten years. Subject to certain requisites, the Company may renew the term of a franchisee upon expiration of the initial term, for an additional ten-year periods. The renewal fee, to be no more than 25% or $10,000 of the then current initial franchise fee, whichever is greater, is paid in consideration of the rights granted in the franchise agreement and is non-refundable. The renewal fee is recognized as revenue over the term of the renewal period.
The initial equipment package fee is $8,000 from Pearce Bespoke (as defined in the franchise agreement. The franchisee obtains control of the equipment and revenue is recognized upon the execution of the franchise agreement.
If a franchise owner is operating under a semi-absentee owner model and hire a clothier immediately, franchisees are required to purchase a Clothier Inventory Package for $2,700 per clothier (as defined in the franchise agreement). The franchisee obtains control of the inventory and revenue is recognized upon the execution of the franchise agreement.
Accounts Receivable – The Company grants credit without collateral to a majority of its franchisees and records accounts receivable at the time when a new franchise agreement is signed or the contractual criteria for billing has been satisfied.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 FDD, Pearce Bespoke grants franchisees the right to operate a Pearce Bespoke franchised business, allowing them to sell quality custom clothing and accessories. This is facilitated through the use of Pearce Bespoke's proprietary methods, techniques, trade dress, trademarks, and logos, which are licensed to the franchisee. The initial franchise agreement lasts for ten years, and franchisees may have the option to renew for additional ten-year periods, subject to certain requirements and the payment of a renewal fee.
The initial franchise fee compensates Pearce Bespoke for granting these rights, and this fee is recognized as revenue over the initial ten-year term of the franchise agreement. Similarly, any renewal fees are recognized over the term of the renewal period. Franchisees are also obligated to pay franchise royalties, calculated as either 10% of their gross revenue or a minimum weekly fee, which starts at $100 per week and increases in subsequent years of operation. These royalties compensate Pearce Bespoke for the use of its license and contribute to the ongoing development of the brand and support for the franchise system.
In addition to the franchise rights, franchisees may also need to purchase an initial equipment package for $8,000 and a Clothier Inventory Package for $2,700 per clothier if they operate under a semi-absentee owner model. These fees provide the franchisee with control of the equipment and inventory, with revenue recognized upon the execution of the franchise agreement. The FDD also mentions that the company grants credit without collateral to a majority of its franchisees and records accounts receivable at the time when a new franchise agreement is signed or the contractual criteria for billing has been satisfied.