International Housewares Retail discloses Japan Home franchise fees, with minimum royalties for the first two years

International Housewares Retail (Hong Kong stock code: 1373) issued a supplementary announcement on 29 October 2026 setting out the fees and allocation of costs under its Japan Home master franchise arrangement in Singapore. For prospective franchise operators assessing this market, the key issue is not simply the change in store operating model, but also the operational obligations the master franchisee must take on alongside royalty payments.

Minimum royalties for the first two years, alongside product supply revenue

According to the announcement, the annual royalty for each of the first two years will be S$100,000 or 0.35% of total sales, whichever is higher. From the third year onwards, it will be calculated at 0.35% of total sales.

In other words, royalties in the first two years will not simply rise and fall with sales: a minimum payment applies. Operators assessing this type of arrangement need to consider both their sales forecasts and the minimum payment obligation, rather than focusing solely on the percentage rate.

Royalties are not the brand owner's only source of revenue. International Housewares Retail will remain a core supplier, providing household goods and fast-moving consumer goods to the master franchisee on a cost-plus basis. The announcement states that the post-transition revenue model will comprise wholesale product supply and royalties. The royalty rate alone therefore does not capture the operator's total purchasing and brand-related costs.

Lease, operating and staffing obligations will also transfer

The announcement disclosed that the 30 stores involved in the handover generated approximately HK$201 million in revenue for the financial year ended 30 April 2026, accounting for around 72.8% of the Singapore segment's retail revenue. The franchisor incurred approximately S$13 million in operating expenses for these stores during the same year, equivalent to around HK$75.4 million.

Once the handover is complete, the master franchisee will bear purchasing and operating costs, while the associated direct lease liabilities will also transfer. The operator is therefore taking on more than the right to use the brand: it must also provide the funding and assume the responsibilities needed to run the stores day to day.

Before the transition, the franchisor directly employed more than 200 store-level and operations staff in Singapore. According to the announcement, following completion of the handover, the master franchisee will take responsibility for all store operations staff, sales teams and related employment obligations. These include salaries, Central Provident Fund contributions, allowances and statutory holiday entitlements accrued after 19 August 2026.

The group will retain a small number of local support staff to handle product sourcing and logistics, quality control, brand compliance and audit oversight. This division of responsibilities—brand oversight retained by the group, with frontline operations handled by the incoming operator—is a key feature of the arrangement.

Separate settlement arrangements for assets, deposits and existing stock

In addition to recurring fees, the announcement sets out asset transfer payments: a one-off payment of S$39,000 for store and warehouse shelving, S$325,000 for fit-out costs, and an arrangement for the full reimbursement of lease deposits of up to S$2 million.

Existing stock is subject to a separate sales proceeds allocation mechanism. The relevant annual cap is calculated by multiplying the audited cost value of stock held in the existing stores as at 19 August 2026 by the franchisor's 66% share of sales proceeds. The announcement expects this stock to be cleared by 31 December 2026.

These items show why funding requirements for taking over existing stores should not be estimated solely on the basis of annual royalties. Shelving, fit-outs, lease deposits and transitional stock each have their own settlement basis and need to be checked separately from the day-to-day operating budget.

The brand owner's financial expectations are not a forecast of franchisee returns

International Housewares Retail said its Singapore retail business had recorded persistent net losses over a number of years because of substantial operating overheads. The company expects the impact of reduced direct retail revenue to be offset by product supply sales, royalty income and the transfer of associated lease liabilities and operating costs. The board considers that the transaction will not have a material adverse effect on the group's overall net assets or earnings.

This is the brand owner's assessment of the financial impact on its own business, not a profit forecast for the master franchisee. Equally, the assumptions about future sales used in the announcement to determine annual transaction caps should not be treated as realised revenue or a guarantee of returns.

Practical takeaway: Prospective franchise operators assessing a store takeover should include royalties, purchasing terms, lease liabilities, employment obligations and transitional payments as separate items in their cash-flow budgets before deciding what scale of operation they can afford. The royalty rate alone is not enough to assess the investment as a whole.