Ben Gilbert: belief

Transcript context

…And there’s actually a specific tax reason why it’s a royalty on sales. From what I could tell—I’m not a tax expert—I think royalties are tax-deductible. By shipping money around between two entities instead of having it just be one simple C-Corp that runs the whole company, they are actually able to deduct those royalties off their taxes. Yeah, it is helpful for tax purposes. That parent company did $27 billion in sales of goods and they made $1.4 billion from franchise fees. That number pencils pretty well. IKEA as a whole did $47 billion in revenue. When you think about it, the parent company sells $27 billion of goods to the franchises who then have their own top line of $47 billion. You can start to understand the margin structure a little bit And then they get that (call it) $1.5–$2 billion-ish effective cash flow back in the royalty of that $47 billion total revenue.…

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