If you have a memory of going to Blockbuster Video (or Hollywood Video) and promising to the clerk that you returned the movie on time, you're likely in my age group. This also means you likely have no idea what microtransactions are or why your kid, nephew, niece, or godchild is asking you for Robux for their birthday.

I haven't played a video game in probably 15 years, so when I heard about Robux, I asked a few Gen Z-ers (shout out to Joy and Steven) to explain it to me. Here's a simple analogy. When you went to the arcade back in the day, the games didn't always accept quarters or dollars, so you had to exchange your money for tokens. If you imagine Roblox as a giant arcade, Robux are the tokens.

If you have been asked to buy V-Bucks, that's another token-like virtual currency that is specific to Fortnite, one of the most popular video games in the world. Other examples are Minecoin in Minecraft, Gold in World of Warcraft, and FUT Coins in FIFA.

I already bought the game. Why pay for more?

So if you already spent money for Roblox games or Fortnite, why do your kids need more money to spend inside the game itself? The technical term is microtransactions.

Modern video games have become massive. They're advanced and robust enough to make a classic game like Duck Hunt look several centuries old. One video game, No Man's Sky, can reportedly generate 18 quintillion different planets for players to explore.

With this robustness and complexity came more ways for video game companies to make money. When a player uses in-game funds like Robux and V-Bucks to make an in-game purchase, this is a microtransaction. The purchased items enhance gameplay—upgrading abilities, unlocking special features, and allowing customizations. The sheer number of available items makes each video game look like its own marketplace.

Using Fortnite as an example, you can use V-Bucks to purchase weapons, outfits or "skins," music as your anthem, and even your character's victory dance.

In World of Warcraft, you can buy enhanced characters. Another popular purchase in various games is the controversial loot box—a bundle with an unknown assortment of upgrades, similar to a surprise gift box.

Is this common?

Yes, microtransactions are wildly popular. Some spend hours to earn more virtual currency for their chosen game.

Certain video game currencies are in such high demand that there are even resellers marketing fake coins. Supercell, a multibillion-dollar powerhouse of mobile video games, even added a warning on their support page to inform players of scammers offering discounted Gems and Diamonds, which are the virtual currency for Supercell mobile games.

In one case, a group of players were prosecuted for defrauding a video game company out of in-game currency. Using software, the group hacked the Electronic Arts video game, FIFA, and falsified completed soccer matches to earn FIFA coins. The group then sold these coins on a secondary market for $16 million. All of the group members, one of whom was reportedly a local child prodigy, were either convicted or pled guilty.

As far as the wider market, research indicates video games—and by extension, microtransactions—are not going away anytime soon. According to a recent report by Newzoo and Tebex, the North American gaming market is $52.7 billion. Microtransactions make up half of PC and console video game revenue, while mobile games derive nearly 100% of their revenue from microtransactions.

If you purchased several hundred dollars worth of Robux for your kid's last birthday, you're in line with the average. The report states that North American players spend $325 a year on gaming.

The financial success of some video games resembles that of movies, with games like Call of Duty (COD) turning into full franchises. Since 2003, COD has expanded to 24 different video games and over 500 million copies sold.

Grand Theft Auto (GTA) has remained another juggernaut despite not having a release since 2013. Its holding company, Take-Two Interactive Software, Inc., reported over $5.6 billion in net revenue in its most recent fiscal year, with approximately $710 million coming from GTA products.

If microtransactions use virtual currency, does this affect me tax-wise?

If microtransactions consist of spending and earning virtual currency, is it something you have to report on your taxes? The best and worst answer is "it depends."

With that out of the way, funny enough, the IRS once said 'yes' but then later changed its mind. Then, in a 2020 statement, the IRS said 'no,' as long as the virtual currencies "do not leave the game environment..."

In 2024, new regulations excluded video game currencies from reporting as long as they're not transferred, exchanged, or used outside of the video game.

So if you do end up buying Robux, V-Bucks, or any other video game currency as a gift, you can at least take comfort in knowing that you're not alone, and as long as the currency stays in the game, the IRS likely won't care.

A friend of mine, Kevin, has been brainstorming about how to flex his entrepreneurial muscles. While we were talking about his passions, interests, and knowledge, I asked him if he'd rather start a business from scratch or join a franchise. He gave his outlook on the general pros and cons, and then he threw the question right back at me. To avoid an hour-long response, I gave the best and worst answer possible—"it depends."

As with every important question, it usually just leads to more questions. I don't have all the answers, but as an accountant, I can offer some details to help you make a better-informed decision. If you have similar thoughts to Kevin, here are some key considerations to throw on your whiteboard.

Inital Costs

If you think of a franchise as an exclusive club, this is what you pay to join.

• Initial franchise fees – These can be anywhere from $40,000 to $150,000. Sometimes this fee also covers the cost of standard equipment required.
• Territory rights – Headquarters will assign a specific territory to you, for example, a 10-mile radius around your location. This is sometimes referred to as a development area fee and can cost $15,000 to $30,000.
• Required equipment – Certain equipment is required to set your franchise up for operations, and this can vary greatly depending on your industry. Costs can be as low as $20,000 and as high as $400,000.

Royalties

Many franchises will take 3% to 10% of your gross sales as royalties. Think of it as a fee for using their logos, their ideas, their products, and their reputation. In addition, they may take another 0.5% to 3% of your gross sales for corporate or national marketing, often called a brand fund fee. Sometimes there is yet another smaller percentage taken for local advertising.

Other Fees

If you're surprised about the above, prepare to be even more surprised about these other fees that franchises commonly charge:

• Point of sale (POS) fees – Using the required POS system can cost $100 to $600 per month.
• Electronic funds transfer fee – Payments to the corporation can cost you an extra $0.50 to $1.50 per transaction.
• Initial training fee – As a new franchise owner, you need to take corporate training, which can be $1,000 per person.
• Certification – Some industry skills require testing and certification before you can perform those jobs for customers. These can be $500 per person.
• Convention fees – Some corporate franchises hold annual conventions. Registration can be $500 per owner, with guests costing about half of that.
• Referral fees – If corporate refers leads to you, they can charge 5–10% of the sales that come from those leads.
• Software fees – Required proprietary software can cost $50 to $300 per month.
• Vendor approval fees – Using a non-approved vendor can cost $2,000 to $4,000 for evaluation.
• Renewal fee – Renewing your franchise agreement can cost $1,000 to $15,000.

Violation Fees

The above fees apply when you're doing everything right. If you do something wrong in the franchise’s eyes, you could run into these fees:

• Late reporting – Late accounting or reporting can result in daily penalties or additional royalty charges.
• Incorrect recordkeeping – Poor records may cost $2,000 to $6,000 per month until corrected.
• Audit or examination – Corporate audits can cost $300 to $500 per day.
• Territory violations – Working in another franchise’s territory can result in $2,000 to $6,000 per violation.

So...starting a business from scratch is better?

Not necessarily. Starting your own business has its own disadvantages. A franchise has a system that has been proven to work, at least to some degree. On the other hand, you're the new kid on the block. You may have a better idea and a better product or service than your competitors, but whether the market agrees is always a toss up.

That takes us to our final point—franchise or not, starting a business is risky. Even though different studies state different percentages, they all point to a high failure rate for startups.

So now that you have a little more info than you did yesterday, which do you think is the better option? I'm willing to bet you're thinking, "it depends."