Under what conditions can Aplus (Sunoco) charge an additional royalty fee for non-compliance?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
mployees, managers, officers, agents and representatives to make a good faith effort to enhance and improve the System and the sales of all products and services provided as part of the System. Franchisee shall aim to satisfy the respective Minimum Monthly Royalty Fees in Attachment 1. If such minimum performance criteria are not satisfied, Franchisor reserves the right to require the Owner and/or Designated Manager to attend enrichment training.
13.14. Non-Compliance; Quality Assurance Inspections; Mystery Shops.
13.14.1.Franchisor shall conduct period checks to determine whether Franchisee is in compliance with the System, and shall have the right to assess a non-compliance fee ("Non-Compliance Fee") against the Franchisee for any infractions. If you receive two default notices in any twelve (12) month period for non-compliance for the same term or condition of this Agreement, Sunoco reserves the right to charge you an additional Royalty Fee of one percent (1%) of your total Gross Sales for the month in which the default was issued or its actual costs of enforcement, whichever is higher.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Aplus can charge an additional royalty fee for non-compliance under specific circumstances. If a franchisee receives two default notices within a twelve-month period for non-compliance related to the same term or condition of the Franchise Agreement, Aplus has the right to charge an additional royalty fee. This fee will be one percent (1%) of the franchisee's total Gross Sales for the month in which the default was issued, or Aplus's actual costs of enforcement, whichever is higher. This additional royalty fee will be collected in the month following the notice of assessment.
This policy serves as a financial disincentive for franchisees who repeatedly fail to comply with the terms of their franchise agreement. The fee is designed to compensate Aplus for the additional costs and efforts required to address and rectify the franchisee's non-compliance. The fact that the fee is calculated as either a percentage of gross sales or the actual costs of enforcement ensures that Aplus is adequately compensated, regardless of the franchisee's sales volume or the complexity of the enforcement efforts.
It's important to note that Aplus also retains the right to terminate the Franchise Agreement under Section 13.14, in addition to charging the non-compliance fee. This highlights the seriousness with which Aplus views repeated instances of non-compliance. Franchisees should, therefore, prioritize adherence to the terms and conditions of the Franchise Agreement to avoid both financial penalties and the risk of termination.
Furthermore, Aplus reserves the right to impose an additional non-compliance fee per month if a franchisee fails to continuously comply with Aplus's space allocation/planogram requirements for the store by, for example, over expanding the beer/wine segment at the store. This charge is in addition to and without prejudice to Aplus's remedies for a material default/termination under the terms of the applicable agreement.