Does the 360 Painting franchisee have to pay unpaid royalty fees upon termination?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
- 20.1 Obligations upon Termination or Expiration. Upon the expiration or termination of this Agreement, whether by reason of lapse of time, default in performance or other cause or contingency, Franchisee shall:
- (iii) immediately pay all sums owing to Franchisor which may include, but not be limited to, all damages, costs and expenses, including reasonable attorneys' fees, unpaid Royalty Fees, and any other amounts due to Franchisor;
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, a franchisee is obligated to pay any outstanding royalty fees upon termination of the Franchise Agreement. This requirement applies regardless of the reason for termination, whether it's due to the agreement's expiration, a default in performance, or any other cause.
Specifically, upon termination, the 360 Painting franchisee must immediately pay all sums owed to the franchisor. These sums include, but are not limited to, any damages, costs, expenses (including reasonable attorneys' fees), unpaid royalty fees, and any other amounts due to 360 Painting. This means that if a franchisee has not kept up with their royalty payments during the term of the agreement, they must settle those outstanding balances when the franchise relationship ends.
This provision protects 360 Painting by ensuring that franchisees fulfill their financial obligations even after the agreement is terminated. For a prospective franchisee, this highlights the importance of maintaining timely royalty payments to avoid a potentially significant financial burden upon termination. It's a fairly standard clause in franchise agreements, intended to ensure that the franchisor receives all compensation they are due for the franchisee's use of the 360 Painting system and brand during the franchise term.