Does Belocal specify how the average Royalty is calculated for the Wind-Down Damages fee?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Management Fee | 45% of monthly Cash Received, plus any expenses we incur in managing the Franchised Business | Monthly | Only payable in the event we must operate your franchise due to death, disability, defaults etc. The Management Fee is in addition to other fees due to us. |
| Customer Complaint Fee | Our costs and expenses associated with our response to and any resolution of a complaint | On demand | If an advertiser, client, or third party complains to us and you fail to satisfactorily remedy the complaint, you will pay us our costs and expenses associated with our response to and any resolution of the complaint. |
| Wind-Down Damages | An amount equal to the greater of (a) 6 months’ worth of the average Royalty you paid for the 12 months prior to the default or (b) $2,500 | On demand | Only payable if you fail to comply with the wind-down procedures or abandon the Franchised Business. |
| Transfer Damages | Greater of 15% of transfer price or $25,000 | Within 15 days of our demand | You will pay these transfer damages if you do not comply with the transfer terms under the Franchise Agreement. |
Source: Item 6 — OTHER FEES (FDD pages 14–31)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the Wind-Down Damages fee is calculated based on the average Royalty paid over a specific period. If a franchisee fails to comply with wind-down procedures or abandons the franchised business, Belocal will charge Wind-Down Damages. This fee is the greater of two amounts: either six months' worth of the average Royalty paid by the franchisee for the 12 months prior to the default, or a flat $2,500.
This means that if a franchisee's average Royalty payments were high in the year before the default, the Wind-Down Damages could significantly exceed the $2,500 minimum. The calculation uses a backward-looking average of Royalty payments, providing a quantifiable basis for the fee. However, the FDD does not specify the exact method of calculating the average Royalty, such as whether it is a simple average or a weighted average.
For a prospective Belocal franchisee, this highlights the importance of understanding the wind-down procedures and the potential financial implications of non-compliance or abandonment. It would be prudent to clarify with Belocal how the average Royalty is specifically calculated to fully understand the potential financial exposure related to Wind-Down Damages.