Note 7:  Royalties and Fees

Approximately $294,617 and $325,305 are included in 2024 and 2025, respectively, for initial fees in the Consolidated Statements of Operations. Also included in royalties and fees were approximately $145,000 and $84,311 in 2024 and 2025, respectively, for equipment commissions.  Most of the cost for the services required to be performed by the Company are incurred prior to the initial fee income being recorded which is based on contractual liability for the franchisee.

In conjunction with the development of Noble Roman’s Pizza and Tuscano’s Italian Style Subs, the Company has devised its own recipes for many of the ingredients that go into the making of its products (“Proprietary Products”).  The Company contracts with various manufacturers to manufacture its Proprietary Products in accordance with the Company’s recipes and formulas and to sell those products to authorized distributors at a contract price which includes an allowance for use of the Company’s recipes.  The manufacturing contracts also require the manufacturers to hold those allowances in trust and to remit those allowances to the Company on a periodic basis, usually monthly.  The Company recognizes those allowances in revenue as earned based on sales reports from the distributors.

During the 12-month period ended December 31, 2025 there were no company-operated or franchised Craft Pizza & Pub restaurants opened or closed.  During that period there were approximately 60 new non-traditional outlets opened and six non-traditional outlets closed.