When calculating early termination fees for an Aplus franchise, what is the alternative method for determining the Monthly Royalty Fee if not using the running average, and what agreement defines the Annual Gross Sales Requirement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
Note 4: If the APLUS Franchise Agreement is terminated prior to the end of its stated term, you must pay us liquidated damages. For the period from the earlier of the early termination date or the last month in which Royalty Fees were paid to us, through and including the end of the term of the APLUS Franchise Agreement you shall pay us a Liquidated Damage Royalty Fee equal to the higher of:
- (a) the running average Monthly Royalty Fee for the 12-month period immediately preceding the early termination date or the running average for such shorter duration where the APLUS Franchise Agreement has not been in effect for twelve (12) months; or
- (b) the Monthly Royalty Fee calculated based upon the Annual Gross Sales Requirement set forth in your APLUS Franchise Agreement.
Source: Item 6 — OTHER FEES (FDD pages 16–28)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, if the Aplus Franchise Agreement is terminated early, the franchisee must pay liquidated damages. This liquidated damage royalty fee is the higher of two calculations. The first calculation is based on the running average Monthly Royalty Fee for the 12-month period immediately preceding the early termination date, or a shorter duration if the agreement hasn't been in effect for 12 months.
The alternative calculation for the Monthly Royalty Fee is based upon the Annual Gross Sales Requirement. This Annual Gross Sales Requirement is specifically set forth in the Aplus Franchise Agreement.
This means that if a franchisee terminates their agreement early, Aplus will calculate the potential royalty fee owed in two different ways and charge the higher amount. Franchisees should carefully review their Aplus Franchise Agreement to understand the Annual Gross Sales Requirement and its potential impact on early termination fees.