Could the royalty fee or advertising contribution be higher in the renewed Beggars Pizza franchise agreement?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
taurants in the System in Franchisor's reasonable business judgment;
- 14.3.4 That the transferor executes a general release, in a form satisfactory to Franchisor, of any claims against Franchisor and its affiliates, and their respective officers, directors, agents, shareholders, and employees;
- 14.3.5 That (a) (i) the transferee (and if the transferee is other than an individual, such owners of a beneficial interest in the transferee as Franchisor may request) enters into a written assignment, in a form satisfactory to Franchisor, assuming and agreeing to discharge all of Franchisee's obligations under the Agreement, or (ii) the transferee executes, for a term ending on the expiration date of the Agreement and with such renewal terms as may be provided by the Agreement, Franchisor's then-current form of franchise agreement and other ancillary agreements as Franchisor may require for the Restaurant, which agreements will supersede the Agreement in all respects, and the terms of which may differ from the terms of the Agreement including, without limitation, a higher royalty fee and advertising contribution and a smaller or modified Franchisee's Territory, except that transferee will not be required to pay any initial franchise fee, and (b) the transferee or its principals guarantee the performance of all such obligations in writing in a form satisfactory to Franchisor;
- 14.3.6 That the transferee (and if the transferee is other than an individual, such owners of a beneficial interest in the transferee as Franchisor may request) demonstrates to Franchisor's satisfaction that it meets Franchisor's educational, managerial, and business
standards; possesses a good moral character, business reputation, and credit rating; has the aptitude and ability to operate the Restaurant (as may be evidenced by prior related business experience or otherwise); and has adequate financial resources and capital to operate the Restaurant;
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 Beggars Pizza Franchise Disclosure Document, the royalty fee and advertising contribution could be higher in a renewed franchise agreement. Specifically, if a franchisee transfers their franchise to a new owner, Beggars Pizza may require the new owner to execute Beggars Pizza's then-current form of franchise agreement. The terms of this new agreement may differ from the original agreement, including potentially higher royalty fees and advertising contributions. However, the new owner would not be required to pay an initial franchise fee.
This clause protects Beggars Pizza by allowing them to update the financial terms of the franchise agreement to reflect current market conditions or changes in the franchise system when a franchise changes hands. For a potential franchisee, this means that if they later decide to sell their franchise, the buyer might face higher fees than they were originally paying. This could affect the resale value of the franchise.
Furthermore, even when a franchisee seeks to renew their own agreement (not transfer it), Beggars Pizza may, at its option, require the franchisee to execute Beggars Pizza's then-current form of franchise agreement. This updated agreement would supersede the original and, as with a transfer, could include a higher royalty fee and advertising contribution. The franchisee will also be required to pay a renewal fee equal to thirty-three percent (33%) of Beggars Pizza's then-current initial franchise fee.
These stipulations regarding franchise transfers and renewals are fairly common in the franchise industry, as they allow franchisors to keep franchise agreements up-to-date. However, prospective Beggars Pizza franchisees should carefully consider the potential for increased fees when evaluating the long-term costs and potential profitability of the franchise.