Are royalty fees paid to Azal Coffee refundable?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
You must pay us a royalty fee in an amount equal to five percent (5%) of your Gross Sales. You must report Gross Sales and pay royalty monthly, in the manner specified in Section 4.13, by the 1st business day of each calendar month based on your Gross Sales for the preceding calendar month. You must make royalty payments daily or weekly or at some other interval, instead of monthly, if specified by us. Royalty fees are not refundable.
"Gross Sales" means the entire amount of all of your revenues from the ownership and operation of the Franchise Business and any business at or about the Franchise Location including sales at or from the Franchise Location and outside sales and sales at events outside the Franchise Location as well as the proceeds of any business interruption insurance, whether the revenues are evidenced by cash, credit, checks, gift certificates, coupons and premiums (unless exempted by us), services, property or other means of exchange, excepting only the amount of any sales taxes
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, royalty fees are not refundable. The franchisee must pay a royalty fee equal to five percent (5%) of Gross Sales. These royalty payments must be reported and paid monthly, by the 1st business day of each calendar month, based on the Gross Sales for the preceding month. Azal Coffee may also specify that royalty payments are made daily, weekly, or at some other interval instead of monthly.
Gross Sales are defined as the entire amount of all revenues from the Franchise Business, including sales at the Franchise Location, outside sales, and sales at events outside the Franchise Location. This includes revenues evidenced by cash, credit, checks, gift certificates, coupons, services, property, or other means of exchange. The only exception is the amount of sales taxes collected and paid to the taxing authority. Franchisees can deduct cash refunded and credit given to customers, as well as receivables uncollectible from customers, when computing Gross Sales, but only if these amounts were previously included in Gross Sales for which royalty fees were paid. Fees taken by third-party delivery service providers cannot be deducted.
This non-refundable royalty fee structure is a standard practice in franchising. It means that once a royalty payment is made to Azal Coffee, it will not be returned to the franchisee under any circumstances. This is an important consideration for prospective franchisees as it impacts their financial planning and obligations to the franchisor.