Can the royalty fees for a Beem Light Sauna franchise be higher in the successor term?
Beem_Light_Sauna Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.2 Successor Term.
Upon the expiration of the Initial Term, if you (i) are not in default under this Agreement, (ii) have substantially complied with this Agreement throughout the Term, (iii) have timely paid all monies due to us or our Affiliates, and (iv) comply with this Section 2.2, you may, at your option, obtain two additional consecutive successor terms of five years each (each, a "Successor Term").
The Initial Term and Successor Terms are referred collectively in this Agreement as the "Term." You may only exercise this right to obtain a Successor Term if:
(a) You give us written notice of your desire to obtain a successor License at least six, but no more than 12, months before the expiration of the then-current Initial Term or Successor Term;
(b) You and your Owners (as applicable) executing and returning to us the successor Franchise Agreement, Owner's Guarantee, and ancillary agreements we provide to you to govern your ownership and operation of the Studio during the Successor Term (the "Successor Agreements"), which you acknowledge may contain terms materially different than those contained in this Agreement, including (i) higher rates of Royalty Fees and Brand Fund Fees (as both are herein defined) and other fees and charges and (ii) a modified Territory.
Source: Item 23 — RECEIPT (FDD pages 71–230)
What This Means (2025 FDD)
According to Beem Light Sauna's 2025 Franchise Disclosure Document, the royalty fees can be higher in the successor term. To obtain two additional consecutive successor terms of five years each after the initial term, a franchisee must meet certain conditions. These conditions include not being in default, substantially complying with the agreement, timely paying all monies due, and complying with specific requirements for obtaining a successor term.
One critical aspect of the successor term is that the new franchise agreement may contain terms that are materially different from the original agreement. Specifically, the franchisor may implement higher rates for Royalty Fees and Brand Fund Fees, as well as introduce other new fees and charges. Additionally, the territory granted to the franchisee could be modified during the successor term.
These changes reflect the franchisor's assessment of what is appropriate for the successor term, considering factors such as the studio being an established business, the payment of a successor fee instead of an initial franchise fee, adjustments to the territory based on demographic and competitive changes, and the absence of further renewal or extension rights. Therefore, a Beem Light Sauna franchisee should be prepared for potentially higher royalty fees and other modified terms if they choose to renew their franchise agreement for a successor term.