What are the consequences if I fail to pay royalty fees when due to Aw?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
15.2 By the Company With Opportunity to Cure. We have the right to terminate this Agreement upon written notice to you if you (or any of your Owners):
(a) fail to accurately report the Gross Revenue of your Papa Ray's Pizza Restaurant or to timely pay royalty fees, marketing fund contributions, or other payments due to us or our affiliates, and do not correct such failure within ten (10) days after written notice of such failure is delivered to you;
10.6 Interest on Late Payments. To encourage prompt payment of all amounts due to us and to cover the costs and expenses involved in handling and processing late payments, you will pay a late payment charge equal to the greater of (i) One Hundred Fifty Dollars ($150.00) or (ii) one and one-half percent (1 ½%) per month on all payments due to us during the period of time said payments are due and unpaid, but no more than the highest interest rate permitted by law. (You acknowledge that the inclusion of this Paragraph in this Agreement does not mean we agree to accept or condone late payments, nor does it indicate that we have any intention to extend credit to, or otherwise finance your operation of the Papa Ray's Pizza Restaurant.) We shall have the right to transfer from your bank account designated for making payments to us in the amount of any interest due and owing under this Paragraph. In addition, you will pay us any and all service charges we incur for each rejected electronic transfer or if you submit to us a check that is not honored and/or returned for insufficient funds.
(i) fail on three (3) or more separate occasions within any twelve (12) consecutive month period to submit when due financial statements, reports or other data, information or supporting records, to pay when due the royalty fees, marketing fund contributions, other payments due to us or to pay amounts due to other persons, or otherwise fail to comply with this Agreement, or with any mandatory specification, standard or operating procedures we prescribe from time to time, whether or not such failures to comply are corrected after notice of those failures to comply is delivered to you;
(b) We shall have the right to proceed by judicial process in lieu of arbitration to enforce your obligations to pay us under Section 10 of this Agreement and to seek collection of such fees due and owing to us.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, failing to accurately report gross revenue or timely pay royalty fees, marketing fund contributions, or other payments can lead to termination of the franchise agreement. However, Aw must provide written notice of the failure, and the franchisee has ten days to correct the issue. If the franchisee corrects the failure within this period, Aw cannot terminate the agreement.
Aw also charges interest on late payments. The late payment charge is the greater of $150.00 or one and one-half percent (1 ½%) per month on the overdue amount, but it will not exceed the highest interest rate permitted by law. Aw has the right to withdraw the interest due from the franchisee's designated bank account. Additionally, the franchisee is responsible for any service charges Aw incurs due to rejected electronic transfers or dishonored checks.
Furthermore, if a franchisee fails on three or more separate occasions within any twelve-month period to submit financial statements, reports, or other data when due, or to pay royalty fees, marketing fund contributions, or other payments when due, Aw has grounds for termination, regardless of whether the failures are corrected after notice. Aw also has the right to proceed by judicial process in lieu of arbitration to enforce the franchisee's obligation to pay fees and seek collection of such fees due.
These provisions highlight the importance of maintaining accurate financial records and ensuring timely payments to Aw. Franchisees should be aware of these potential consequences and take steps to avoid late payments or underreporting of revenue to maintain a good standing with Aw and avoid potential termination of their franchise agreement.