If a 1-800-GOT-JUNK? Franchise Agreement is renewed, by what percentage will the Minimum Royalty increase?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
The Minimum Royalty is the following amount for each subterritory in your Territory: (i) $1,200 in the calendar year which the Franchised Business commences operations, pro-rated as necessary to account for operations for a partial calendar year only; (ii) $1,900 in the second calendar year of operations; (iii) $2,500 in the third calendar year of operations; (iv) $3,200 in the fourth calendar year of operations; (v) $4,000 in the fifth calendar year of operations; and (vi) in the event of a renewal, no less than the Minimum Royalty payable during the last calendar year of the term or previous renewal term (as the case may be) plus an increase of no less than 10% (except as otherwise specified in any renewal agreement). The Minimum Royalty must be achieved in each subterritory in your Territory, regardless of the performance in other subterritories.
Source: Item 6 — Other Fees (FDD pages 11–17)
What This Means (2025 FDD)
According to 1-800-GOT-JUNK?'s 2025 Franchise Disclosure Document, upon renewal of the Franchise Agreement, the Minimum Royalty will increase by no less than 10%. This increase is calculated based on the Minimum Royalty payable during the last calendar year of the original term or any previous renewal term. However, the FDD also notes that the specific increase may vary as specified in any renewal agreement, giving 1-800-GOT-JUNK? some flexibility in setting the new Minimum Royalty.
For a prospective 1-800-GOT-JUNK? franchisee, this means that when considering renewing their franchise agreement, they should anticipate at least a 10% increase in the Minimum Royalty. This increase is on top of any potential inflation adjustments that may also apply to the Minimum Royalty amount. Franchisees should carefully review the terms of their renewal agreement to understand the exact amount of the Minimum Royalty increase and any other changes to the agreement.
It's important to note that the 10% increase is a minimum, and the actual increase could be higher if specified in the renewal agreement. This provision allows 1-800-GOT-JUNK? to adjust the Minimum Royalty based on factors such as market conditions or the franchisee's performance. Franchisees should negotiate the terms of their renewal agreement to ensure that the Minimum Royalty increase is reasonable and sustainable for their business.
Understanding the Minimum Royalty and its potential increase upon renewal is crucial for franchisees to accurately forecast their expenses and profitability. Franchisees should also be aware that the Minimum Royalty must be achieved in each subterritory within their territory, regardless of the performance in other subterritories. This requirement adds another layer of complexity to the financial planning for 1-800-GOT-JUNK? franchisees.