Description: Royalty fees represent the payment that franchisees owe to the franchisor based on their sales. This article will explain how these fees are calculated and collected, ensuring transparent communication and a smooth flow of operations between the franchisee and franchisor.
Description | Formula/Calculation | Sample Month: July |
Total Sales Revenue | From Xola | $10,000 |
Refunds Deducted | From Xola | -$500 |
Partner Fees Deducted | From Xola | -$600 |
State Sales Tax Deducted | If applicable (Hypothetical) | -$200 |
Adjusted Revenue | = Total Sales - Refunds - Partner Fees - Sales Tax | $8,700 |
Royalty (5% of Adjusted Revenue) | | $435 |
Franchise Fee Payment Process
- Monthly Report Generation:
- By the 3rd of each month, you will receive an email detailing your total sales revenue and the corresponding royalty fee calculation.
- Use the provided information to verify the accuracy of the details:
- Check against your sales data from Xola.
- Deduct any refunds, partner fees, and applicable state sales tax.
- Calculate the adjusted revenue.
- Ensure the royalty fee (5% of adjusted revenue) matches the information in the email.
- Confirm and Report
- If all the details are accurate, send a confirmation email stating the revenue is correct.
- If you have any additional revenue ((like donations or groupon sales) that was not documented in the email, report it at this stage. Ensure all sales are accounted for to avoid discrepancies.
- Address Discrepancies
- If there are discrepancies between your calculations and the provided figures, communicate this immediately. Franchisees have until the seventh of the month to review this report, ensuring it aligns with their own records.
- Clearly explain why the numbers aren't aligning.
- Provide evidence, such as screenshots or records, to support your claims.
- Prepare for Franchise Fee Deduction
- Ensure your bank account has sufficient funds to cover the franchise fee.
- Automatic Deduction: If no disputes are raised by the seventh, the royalty fee is automatically deducted from the franchisee's bank account, as detailed in the franchise agreement.
- Notification of Payment: Franchisees will see the deduction around the eighth or ninth of the month.
Resources:
- Xola - Main tool for recording and retrieving sales data.
- Franchise Agreement - Contains clauses about royalty fees and payment methods.
FAQ:
1. When should I expect to receive the monthly royalty fee calculation email?
Answer: You should expect to receive the royalty fee calculation email by the 3rd of each month. This email will detail your total sales revenue and the corresponding royalty fee calculation.
2. What if I find discrepancies in the revenue reported in the email?
Answer: If you find any discrepancies between your records from Xola and the provided figures in the email, communicate the difference immediately. Provide clear explanations and, if possible, evidence to support your claims.
3. I have some undocumented revenue. When and how should I report it?
Answer: If you have any additional revenue that wasn't documented in the email you received, report it when you send your confirmation email about the revenue's accuracy. It's crucial to ensure all sales are accounted for to avoid any future discrepancies.
4. When should I expect the franchise fee to be deducted from my bank account?
Answer: You should expect the franchise fee deduction to occur between the 7th and the 9th of each month. Ensure your bank account has sufficient funds during this period to cover the fee.
5. What happens if I don’t have enough funds in my bank account for the fee deduction?
Answer: It's essential to always maintain enough balance in your bank account between the 7th and the 9th of the month to avoid any issues. If you suspect there might be insufficient funds, notify the franchisor in advance and make the necessary arrangements.
6: How are credit card fees handled in relation to my sales revenue and the franchise fee?
Answer: Credit card fees are considered a business expense and are not deducted from your total sales revenue when calculating the franchise fee. This means the franchise fee includes any amounts you might pay for credit card processing. As a franchisee, you're responsible for managing and covering credit card fees as part of your operational costs.
What Good Looks Like: Include screenshots of:
- A completed sales record from Xola for a month.
- The generated monthly report showing all sales, deductions, and the final royalty amount.
- Confirmation of the automatic deduction from the bank account.
- Correspondence or notifications sent to franchisees regarding their royalty fees.
- Any audit trail showing corrections or discrepancies addressed.