When does the Minimum Royalty Fee apply to a Punch King Fitness franchise?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
OTHER FEES**
| Name of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty Fee | 5% of Gross Revenues1 each month after opening ("Standard Royalty") and when open 6 full calendar months, Standard Royalty or $1,000 ("Minimum Royalty"), whichever is greater, each and every month thereafter | 4th of each month | Royalty Fees are payable by electronic funds |
Source: Item 6 — OTHER FEES (FDD pages 10–16)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, the Minimum Royalty Fee becomes applicable after a Punch King Fitness franchise has been open for six full calendar months. After this initial period, franchisees are required to pay either the Standard Royalty, which is 5% of Gross Revenues, or a Minimum Royalty of $1,000, whichever amount is greater. This fee is due on the 4th of each month.
This structure means that for the first six months of operation, a Punch King Fitness franchisee only pays the 5% royalty on gross revenues. However, once the six-month period has passed, the franchisee must ensure that their royalty payment is at least $1,000 each month. If 5% of their gross revenues is less than $1,000, they are still obligated to pay the $1,000 minimum.
This minimum royalty fee is a common practice in franchising to ensure that the franchisor receives a baseline level of income from each franchise unit, regardless of its sales performance. For a prospective Punch King Fitness franchisee, it's crucial to factor this minimum royalty into their financial projections to ensure they can meet this obligation, especially during slower months or the early stages of business growth. Understanding the timing and amount of this fee is essential for managing cash flow and maintaining a healthy financial standing with Punch King Fitness.