Can Bang Cookies change the royalty fee during a renewal term?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Throughout the Term of this Agreement, Franchisee shall pay to Franchisor a continuing weekly nonrefundable royalty fee (the "Royalty Fee") in an amount equal to 6% (the "Royalty Rate") of Franchisee's weekly Gross Sales. The Royalty Fee shall be calculated on a weekly basis for each respective weekly
Accounting Period. The Royalty Fee during any Renewal Term shall be determined by Franchisor but shall not be less than the Royalty Fee and Royalty Rate set forth in this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, the royalty fee for any renewal term will be determined by Bang Cookies. However, the royalty fee will not be less than the royalty fee and royalty rate set forth in the original agreement.
This means that while Bang Cookies has the right to adjust the royalty fee upon renewal, they cannot lower it below the rate established in the initial franchise agreement. For a prospective franchisee, this provides some assurance that the royalty rate will not decrease, but it also introduces the possibility of an increased royalty fee upon renewal.
It is important for a potential Bang Cookies franchisee to consider this when evaluating the long-term financial viability of the franchise. Understanding the potential for increased royalty fees is crucial for accurate financial forecasting and business planning. Franchisees should discuss with Bang Cookies what factors might influence a royalty fee increase upon renewal.