What are the two components that determine the Royalty Fee for a Pearce Bespoke franchise?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee will, for the term of this Agreement, pay to Franchisor a Royalty Fee equal to the greater of (i) ten percent (10%) of Franchisee's Gross Sales (as defined below), or (ii) a mandatory Minimum Weekly Royalty Fee (as defined in Section 5(B) below). Franchisee's obligation to pay Franchisor the Royalty Fee under the terms of this Agreement will remain in full force and effect until this Agreement has expired or is terminated or transferred under the provisions herein.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 Pearce Bespoke Franchise Disclosure Document, the Royalty Fee is determined by two components. The franchisee will pay the greater of either 10% of the franchisee's Gross Sales or a mandatory Minimum Weekly Royalty Fee. Gross Sales includes the total revenue from goods and services, whether paid in cash, check, credit card, or trade, but excludes sales tax collected and paid to tax authorities.
This means that as a Pearce Bespoke franchisee, you'll need to calculate both 10% of your Gross Sales and the Minimum Weekly Royalty Fee, and then pay whichever amount is higher to the franchisor. This structure ensures that Pearce Bespoke receives a consistent income stream, regardless of fluctuations in an individual franchise's sales.
For a prospective franchisee, it's crucial to understand how the Minimum Weekly Royalty Fee is defined, as this sets a baseline for royalty payments. It is also important to understand how 'Gross Sales' is defined, as this figure is used to calculate one of the royalty fee components. Franchisees should aim to exceed the minimum royalty through strong sales performance, as this indicates a healthy and profitable business.
It is also important to note that the obligation to pay the Royalty Fee remains in effect until the Franchise Agreement expires, is terminated, or is transferred.