How does the royalty fee structure for Southern Steer (Item 6) impact the franchisee's profitability, especially considering the initial investment required (Item 7)?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
pment Agreement Exhibit E: Sample Release Exhibit F: State Agency/Agents for Service of Process Exhibit G: State-Specific Addendum Exhibit H: Brand Manual Table of Contents Exhibit I: Deposit Agreement Exhibit J: State Effective Dates and Receipt
ITEM. 6 OTHER FEES
| Type of Fee(1) | Amount | Date Due | Remarks |
|---|---|---|---|
| Royalty | Beginning on the third | Wednesday each | The Royalty is based on Gross |
| month from Your | week for the | Revenues from the previous week | |
| Required Opening Date, 6% of annual Gross Revenues from $1.00 to $1,000,000; 5% from $1,000,001 to $2,000,000; and 4% from $2,000,001 and greater.(2). | preceding week. | for each individual Southern Steer Business You operate. Payments are made via electronic fund transfer ("EFT") or automatic withdrawal. We reserve the right to designate another day of the week for payment. The Gross Revenue calculation is re set each calendar year and is based on each individual Southern Steer Business You operate. | |
| Brand Fund | 1% of weekly Gross | At the time Royalty | Deposited in the brand and |
| Contribution(3) | Revenues. | is paid. | marketing fund ("Brand Fund") controlled by Us. We may increase, reduce, or suspend the Brand Fund Contribution upon prior notice. |
| Type of Fee(1) | Amount | Date Due | Remarks |
| Local Advertising Cooperative Contribution(4) | Up to 1% of monthly Gross Revenues. | Monthly. | Payable if a Local Advertising Cooperative is established and We require You to participate (See Item 11). We do not currently have any Local Advertising Cooperatives established. |
| Supplies and Inventory(5) | Actual Cost. | Upon receipt of supplies or inventory. | You must reimburse Us for all purchases of goods and services We make on Your behalf. |
| Technology Fee | The then current fee. Currently, $507 per month. | Monthly. | The Technology Fee includes the monthly fee paid to our designated suppliers for IFX, email addresses and Google Business page. The Technology Fee may change upon prior notice to You if the vendor changes the fees or We change vendors. |
| POS System Fee | The then current fee. Currentl |
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, the royalty fee structure is a significant factor impacting a franchisee's profitability, especially when considered alongside the initial investment. Southern Steer franchisees are required to pay a royalty fee beginning in the third month after their Required Opening Date. This royalty is calculated weekly, due every Wednesday, and is based on the Gross Revenues from the previous week. The royalty percentage varies based on annual Gross Revenues: 6% on revenues from $1.00 to $1,000,000; 5% on revenues from $1,000,001 to $2,000,000; and 4% on revenues exceeding $2,000,001. The Gross Revenue calculation resets each calendar year for each individual Southern Steer Business. This tiered structure means that as a franchisee's revenue grows, the percentage paid in royalties decreases, which could incentivize higher sales volumes. However, the initial 6% can be a substantial expense, especially in the early months when the business is working to establish itself and recoup the initial investment.
The initial investment for a Southern Steer franchise can be substantial, covering costs such as the initial franchise fee, travel and living expenses for training, and the on-site assistance fee. Item 7 notes that all estimates are based on a new Southern Steer Business with a footprint of approximately 1,800 to 2,300 square feet. The initial investment costs may be higher if a franchisee operates from larger premises. Given that the royalty fee is a percentage of gross revenue, a higher initial investment that leads to higher operating costs could strain profitability, particularly if revenues do not immediately meet expectations. Franchisees need to carefully project their potential revenues and expenses to understand how the royalty fee will affect their bottom line.
Furthermore, Southern Steer also collects a Brand Fund contribution of 1% of weekly Gross Revenues, paid at the same time as the royalty. Franchisees must also consider other fees such as the Technology Fee (currently $507 per month) and the POS System Fee (currently $800 per month), which further impact profitability. The FDD also mentions the possibility of Local Advertising Cooperative Contributions, up to 1% of monthly Gross Revenues, although none are currently established. The royalty fee, combined with these additional fees, necessitates a robust business plan and efficient operations to ensure profitability. Prospective franchisees should conduct thorough financial analysis, considering various revenue scenarios and expense projections, to assess the viability of the Southern Steer franchise opportunity.