Franchise accounting guide What is a 4-4-5 calendar, and why does your royalty week end on the brand’s weekday?

How does a 4-4-5 year work?

Fifty-two weeks make 364 days, grouped into four quarters of thirteen weeks. In a 4-4-5 calendar each quarter is a four-week period, another four-week period and a five-week period; 4-5-4 and 5-4-4 put the long period elsewhere. The point is that every period ends on the same weekday and contains the same number of Saturdays and Sundays as the same period a year earlier, which a calendar month never does.

Why do franchisors use them?

Because the business is weekly. Sales follow the day of the week far more than the date: a calendar month with five Saturdays looks like growth that is not there. A 4-5-4 layout lines up holidays and gives comparable months the same number of weekend days, so like days are compared to like days^[1]. A franchisor comparing hundreds of stores, and a franchisee comparing their own, both want that — which is why many franchise agreements require the franchisee to adopt the brand’s fiscal year. Wingstop’s agreement is one example^[2].

What happens in a 53-week year?

Fifty-two weeks leave one day over each year, two in a leap year, so every five or six years the calendar adds a fifty-third week to stay anchored to the seasons. Retailers following the NRF calendar restate the 53-week year for comparison with the next one, dropping its first week so like weeks still line up^[1]. For your books it means one fiscal year has an extra week of sales, payroll and royalty — budget for it, and do not compare that year to a 52-week one without adjusting.

The tax code allows the same shape. A business may elect a 52-53-week tax year if it keeps its books that way, and the year must always end on the same day of the week — either the last such day in a calendar month or the one nearest the month’s end^[3][4].

Why does the royalty week end on a particular day?

Because the franchisor collects on a fixed rhythm. Wingstop debits royalty every Tuesday for Gross Sales in the week ended the previous Saturday^[2]. A weekly debit for a Saturday-ending week means your royalty expense, the franchisor’s debit and your fiscal weeks all line up only if your books close weeks on Saturday too. Close on Sunday and every week’s royalty is one day out of step with the sales it was charged on.

How do you close a month when a royalty week straddles it?

If your books run on the brand’s 4-4-5 periods, there is nothing to split: period end is a week end. If your books must also produce calendar months — for a lender, a landlord or a partner — accrue the royalty on the days of the straddling week that fall in the month.

Week Sun 27 Sep – Sat 3 Oct: gross sales per the definition   42,300.00
  of which 27–30 Sep (4 days)                                 25,100.00
  of which 1–3 Oct  (3 days)                                  17,200.00

Royalty 6% accrued in September:  25,100.00 × 6% =  1,506.00
Royalty 6% in October:            17,200.00 × 6% =  1,032.00
Debited by the franchisor on Tue 6 Oct:            2,538.00

What if you run more than one brand?

Then you run more than one calendar. Each brand’s stores close on that brand’s weekday and periods, and the entities that hold them report on them. The group view — the one the owner reads — needs a single calendar to add them up on, usually calendar months, with the weeks that straddle a month end accrued as above. Trying to force every brand onto one calendar breaks each brand’s royalty week; keeping them separate and consolidating on months keeps both right.