Is a 1-800-GOT-JUNK? franchisee allowed to withhold payment of royalties due to alleged non-performance by the franchisor?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
to service any National Account. (k) In addition to any other available remedy, Franchisor may withhold partial or complete payment from Franchisee for any centrally-billed National Account work where Franchisee fails to comply with the terms of the Franchise Agreement or the applicable National Account agreement and that failure results in: i. partial or non-payment for the work by the National Account; or ii. Franchisor, Commercial Services or their affiliate incurring cost to remedy such failure. In such case, Franchisor may withhold the amount of the non- or partial-payment, and, or alternatively, the cost, as applicable, from Franchisee. 4905-6245-1013.1 (l) Franchisor may withhold applicable Royalties and Sales Center and Marketing Fees (or their equivalents under the Franchise Agreement) (together, “Fees”) on National Account work or any other amounts owing to Franchisor from any payments to Franchisee on account of services provided to a National Account.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document for 1-800-GOT-JUNK? addresses specific instances where the franchisor may withhold payments from the franchisee, but it does not explicitly state whether a franchisee can withhold royalty payments due to alleged non-performance by the franchisor.
However, the FDD does state that 1-800-GOT-JUNK? may withhold payments from franchisees for centrally-billed National Account work if the franchisee fails to comply with the terms of the Franchise Agreement or the applicable National Account agreement, resulting in partial or non-payment by the National Account, or if 1-800-GOT-JUNK? incurs costs to remedy such failure. In such cases, 1-800-GOT-JUNK? may withhold the amount of the non- or partial-payment, or the cost, from the franchisee. 1-800-GOT-JUNK? may also withhold applicable Royalties and Sales Center and Marketing Fees on National Account work or any other amounts owing to 1-800-GOT-JUNK? from any payments to Franchisee on account of services provided to a National Account.
Because the FDD does not directly address the scenario of a franchisee withholding royalty payments due to the franchisor's alleged non-performance, prospective franchisees should seek clarification from 1-800-GOT-JUNK? regarding their rights and obligations in such situations. It would be prudent to inquire about the specific procedures for resolving disputes related to non-performance and whether withholding royalty payments is permitted during the dispute resolution process. Understanding these details is crucial for making an informed decision about investing in a 1-800-GOT-JUNK? franchise.