2. Royalties and Fees

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

2. Royalties and Fees

Royalties and fees included $37,000 and $51,490 for the three-month periods ended March 31, 2015 and 2016, respectively, of initial franchise fees.  Royalties and fees included $29,054 and $4,108 for the three-month periods ended March 31, 2015 and 2016, respectively, of equipment commissions.  Royalties and fees, less initial franchise fees and equipment commissions were $1,706,517 and $1,660,713 for the three-month periods ended March 31, 2015 and 2016, respectively.  Most of the cost for the services required to be performed by the Company are incurred prior to the franchise fee income being recorded, which is based on a contractual liability for the franchisee.   

There were 2,562 franchises/licenses in operation on December 31, 2015 and 2,632 franchises/licenses in operation on March 31, 2016. During the three-month period ended March 31, 2016, there were 81 new outlets opened and 11 outlets closed. In the ordinary course, grocery stores from time to time add our licensed products, remove them and may subsequently re-offer them. Therefore, it is unknown how many licensed grocery store units included in the 2,632 count above have left the system.

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