How does the royalty fee structure for Southern Steer (Item 6) incentivize or disincentivize revenue growth, considering the initial investment (Item 7)?

Question

Accepted Answer

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. Currently, \$800 per month. | Monthly. | The POS System Fee includes the fee paid to our designated supplier for integration and cloud-based support. This fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors. |
| Direct Ad TV | The then current fee. Currently, \$180 per year. | Annually. | The annual fee covers two direct TV ads. You will pay \$15 annually for each additional Direct Ad TV that you elect to use in your Southern Steer Business. |
| Recipe/Safety Fee | The then current fee. Currently, \$105 per quarter. | Quarterly. | The Recipe/Safety Fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors. |
| Signage Fee | The then current fee. Currently, \$350 per year. | Annually. | This Signage Fee is for digital display signage. The Signage Fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors. |
| Additional Training Fees(6) | Our then current fee. Currently, \$400 per day, per person plus travel and living expenses. | Within 10 days after invoice. | Payable if We conduct additional training at Your Site, if We provide additional training at Our headquarters, You need additional opening assistance, You request that consulting assistance be provided at Your Southern Steer Business or We determine that You require additional training. |
| Type of Fee(1) | Amount | Date Due | Remarks |
| Brand Conference Fee(7) | Our then current registration fee for one person to attend Our annual Brand Conference. | Prior to attending the Brand Conference. | We do not currently conduct a Brand Conference and We do not currently charge this fee. We reserve the right to do so. |
| Transfer Fee(8) | \$10,000 plus our then current training fee for Transferee to attend Our Initial Training Program. | When transfer occurs. | Payable if You transfer Your Southern Steer Business. You must obtain Our prior approval of any transfer. |
| Relocation Fee(9) | Our actual cost, including legal expenses, Site approval expenses and travel and living expenses to conduct Site review (if any). | Upon approval of relocation request. | Payable only if You request the right to relocate Your Southern Steer Business to a different location (See Item 12). |
| Successor Franchise Fee | 25% of the then current Initial Franchise Fee. | At least 90 days before renewing Your right to operate the Southern Steer Business. | Payable only if, after the expiration of Your Franchise Agreement, You meet all requirements, as determined by Us, and are approved by Us to enter into a Successor Franchise Agreement for Your Southern Steer Business. |
| Testing Fee | Actual cost of test and inspection plus travel and living expenses incurred to conduct any inspections. | As invoiced. | Incurred if You request to purchase Goods, Supplies and Services from vendors that are not on our then current supplier list (see Item 8). |
| Audit Fees | Amount incurred by Us to audit Your Southern Steer Business. | Within 10 days of invoice. | Payable only if an audit shows that You understate Your Gross Revenues by more than 2% in any week, month, or year or if You fail to cooperate with Our auditors or inspectors. |
| Correction of Deficiency or Unsatisfactory Condition(10) | Actual Cost. | Within 10 days of invoice. | If You fail to correct deficiency, We may do so on Your behalf and at Your expense. |
| Taxes(11) | Variable. | As incurred. | The amount of all sales taxes, gross receipts and other similar taxes imposed upon, required to be collected by, or paid by Us or Our affiliates, on account of services or goods furnished to You. |
| Type of Fee(1) | Amount | Date Due | Remarks |
| Insurance(12) | Cost of insurance. | As incurred. | We have the right to acquire insurance on Your behalf if You fail to obtain Our required insurance (See Item 8). |
| Indemnification and Costs and Attorneys' Fees | Variable. | As incurred. | You must reimburse Us if We are held liable for claims resulting from Your operation of Your Southern Steer Business. You must also pay Our attorney's fees if We take legal action to enforce the Franchise Agreement due to Your breach. |
| Interest Charges | 1.5% per month or the maximum rate permitted by applicable law, whichever is less. | On demand. | Applies to past due payments payable to Us after a 10-day grace period. |
| Late Charge | The then current late fee for late or non-submittal of required reports or required payments. Our current late fee is \$100. | As assessed. |  |
| Insufficient Fund Fee | \$100 per occurrence. | As incurred. | Due each time a check You write to Us is dishonored, credit card payment is denied, or if You have insufficient funds for an EFT payment. |
| Management Fee | 50% of Gross Revenues. | Payable only upon the death or permanent disability of You or Your Operating Principal or Your abandonment of Your Southern Steer Business. | This amount is in addition to the Royalty Fee and Brand Fund Contribution, if any. |
| Liquidated Damages(13) | \$250 per day. | Upon demand. | Payable for each day unauthorized products or services are offered or sold in Your Southern Steer Business or products or services are acquired from unauthorized suppliers or vendors and sold or offered to be sold in Your Southern Steer Business. |
#### Notes:

(1) Fees. Except where otherwise noted, all fees and costs payable to Us, Our affiliates or Our designees are non-refundable. We may, but are not required to, reduce the Royalty for a period of time for up to the first five qualified Franchisees that acquire a Southern Steer Business. The amount the Royalty may be reduced and the time period the Royalty may be reduced by will depend on a variety of factors,
including a Franchisee's business experience and net worth. We have the right to increase any fees due from You, as well as any charges for products, materials, and services provided to You, based on Our reasonable judgment, from time to time (other than the Royalty Fee percentage). Fees paid to vendors or other suppliers may or may not be refundable depending on the vendors and suppliers. We reserve the right to require You to pay fees and other amounts due to Us via EFT, automatic withdrawal program or other similar means, as described in the Franchise Agreement and/or Brand Manual. If payments are required in this method, You must comply with Our procedures and perform all acts and deliver and execute all documents, including authorization (Attachment D to the Franchise Agreement) for direct debits from Your business bank operating account, which may be necessary to assist in or accomplish payment by this method. Under this procedure You shall authorize Us to initiate debit entries and/or credit correction entries to a designated checking or savings account for payments of fees and other amounts payable to Us and any interest that may be owed. You shall make the funds available to Us for withdrawal by EFT no later than the payment due date. If You sign the MUDA, for the second and each subsequent Franchise Agreement You sign for the Southern Steer Business, You will pay the fees at the rate specified in Our then-current form of Franchise Agreement.

- (2) Gross Revenues.

How does the royalty fee structure for Southern Steer (Item 6) incentivize or disincentivize revenue growth, considering the initial investment (Item 7)?

Answer from 2025 FDD Document

Notes:

What This Means (2025 FDD)

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. Currently, $800 per month.	Monthly.	The POS System Fee includes the fee paid to our designated supplier for integration and cloud-based support. This fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors.
Direct Ad TV	The then current fee. Currently, $180 per year.	Annually.	The annual fee covers two direct TV ads. You will pay $15 annually for each additional Direct Ad TV that you elect to use in your Southern Steer Business.
Recipe/Safety Fee	The then current fee. Currently, $105 per quarter.	Quarterly.	The Recipe/Safety Fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors.
Signage Fee	The then current fee. Currently, $350 per year.	Annually.	This Signage Fee is for digital display signage. The Signage Fee may change upon prior notice to You if the vendor changes the fees, We change functionality, or We change vendors.
Additional Training Fees(6)	Our then current fee. Currently, $400 per day, per person plus travel and living expenses.	Within 10 days after invoice.	Payable if We conduct additional training at Your Site, if We provide additional training at Our headquarters, You need additional opening assistance, You request that consulting assistance be provided at Your Southern Steer Business or We determine that You require additional training.
Type of Fee(1)	Amount	Date Due	Remarks
Brand Conference Fee(7)	Our then current registration fee for one person to attend Our annual Brand Conference.	Prior to attending the Brand Conference.	We do not currently conduct a Brand Conference and We do not currently charge this fee. We reserve the right to do so.
Transfer Fee(8)	$10,000 plus our then current training fee for Transferee to attend Our Initial Training Program.	When transfer occurs.	Payable if You transfer Your Southern Steer Business. You must obtain Our prior approval of any transfer.
Relocation Fee(9)	Our actual cost, including legal expenses, Site approval expenses and travel and living expenses to conduct Site review (if any).	Upon approval of relocation request.	Payable only if You request the right to relocate Your Southern Steer Business to a different location (See Item 12).
Successor Franchise Fee	25% of the then current Initial Franchise Fee.	At least 90 days before renewing Your right to operate the Southern Steer Business.	Payable only if, after the expiration of Your Franchise Agreement, You meet all requirements, as determined by Us, and are approved by Us to enter into a Successor Franchise Agreement for Your Southern Steer Business.
Testing Fee	Actual cost of test and inspection plus travel and living expenses incurred to conduct any inspections.	As invoiced.	Incurred if You request to purchase Goods, Supplies and Services from vendors that are not on our then current supplier list (see Item 8).
Audit Fees	Amount incurred by Us to audit Your Southern Steer Business.	Within 10 days of invoice.	Payable only if an audit shows that You understate Your Gross Revenues by more than 2% in any week, month, or year or if You fail to cooperate with Our auditors or inspectors.
Correction of Deficiency or Unsatisfactory Condition(10)	Actual Cost.	Within 10 days of invoice.	If You fail to correct deficiency, We may do so on Your behalf and at Your expense.
Taxes(11)	Variable.	As incurred.	The amount of all sales taxes, gross receipts and other similar taxes imposed upon, required to be collected by, or paid by Us or Our affiliates, on account of services or goods furnished to You.
Type of Fee(1)	Amount	Date Due	Remarks
Insurance(12)	Cost of insurance.	As incurred.	We have the right to acquire insurance on Your behalf if You fail to obtain Our required insurance (See Item 8).
Indemnification and Costs and Attorneys' Fees	Variable.	As incurred.	You must reimburse Us if We are held liable for claims resulting from Your operation of Your Southern Steer Business. You must also pay Our attorney's fees if We take legal action to enforce the Franchise Agreement due to Your breach.
Interest Charges	1.5% per month or the maximum rate permitted by applicable law, whichever is less.	On demand.	Applies to past due payments payable to Us after a 10-day grace period.
Late Charge	The then current late fee for late or non-submittal of required reports or required payments. Our current late fee is $100.	As assessed.
Insufficient Fund Fee	$100 per occurrence.	As incurred.	Due each time a check You write to Us is dishonored, credit card payment is denied, or if You have insufficient funds for an EFT payment.
Management Fee	50% of Gross Revenues.	Payable only upon the death or permanent disability of You or Your Operating Principal or Your abandonment of Your Southern Steer Business.	This amount is in addition to the Royalty Fee and Brand Fund Contribution, if any.
Liquidated Damages(13)	$250 per day.	Upon demand.	Payable for each day unauthorized products or services are offered or sold in Your Southern Steer Business or products or services are acquired from unauthorized suppliers or vendors and sold or offered to be sold in Your Southern Steer Business.