What is the minimum royalty fee that Bang Cookies can charge during any renewal term?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
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. If any federal, state or local tax or withholding obligation, other than an income tax, is imposed on the Royalty Fee paid by Franchisee to Franchisor that, Franchisor cannot directly and, dollar of dollar, offset against taxes required to be paid by Franchisor under any applicable federal or state laws, then Franchisee must compensate Franchisor in amounts that offset the tax / withholding obligations.
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 during any renewal term will be determined by Bang Cookies, but it cannot be less than the royalty fee and royalty rate set forth in the current agreement. The current royalty fee is 6% of the franchisee's weekly gross sales.
For a prospective franchisee, this means that when renewing the franchise agreement, the royalty fee could remain the same or increase, but it will not go below the initial 6% of weekly gross sales. This provides some predictability, as the franchisee knows the minimum royalty obligation they will face if they choose to renew their agreement.
It is important to note that while the minimum royalty fee is defined, Bang Cookies has the discretion to increase the royalty fee upon renewal. Franchisees should consider this potential increase when evaluating the profitability of their Bang Cookies shop and deciding whether to renew their franchise agreement. Franchisees should discuss with Bang Cookies what factors might influence a royalty fee increase at the time of renewal.