What is the minimum royalty that a Bor Restoration franchisee will pay?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
, you agree that we will have the right to establish, in writing, reasonable new standards, costs, and fees for the implementation of new technology in the System, and you agree to comply with those reasonable new standards.
3.3 Royalty
- a. You will pay the greater of the Minimum Royalty or the Percentage Royalty monthly (Royalty), which is collected in the manner more fully stated below.
- b. The Minimum Royalty will never be less than $500.
- i. It may be increased no more often than once every 36 months during the Initial Term to reflect an increase in the "Consumer Price Index" for all urban consumers, all items seasonally adjusted (base 1982-1984) (CPI-U) that is quoted by the U.S. Bureau of Labor Statistics, or its successor.
- ii. To determine if there is an increase in the CPI-U, we will first determine the baseline CPI-U (Base CPI-U) as of the Effective Date. If the Effective Date is other than the first day of a month, then the Base CPI-U will be determined on the first day of the first month following the Effective Date. Then, on the 36th-month anniversary of the Effective Date and again on the seventy-second month anniversary (or the first day of the month following the 36th or 72d-month anniversary if that date is other than the first day of a month), we will determine the then-current CPI-U. (Current CPI-U). We will calculate the increase (if any) in the Minimum Royalty by multiplying the then-current Minimum Royalty by a fraction, the denominator of which is the Base CPI-U and the numerator of which is the Current CPI-U.
- c
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, franchisees are required to pay a royalty fee, which is the greater of a minimum royalty or a percentage royalty. The minimum royalty will never be less than $500. This means that even if the percentage royalty calculation based on gross sales is less than $500 in a given month, the franchisee must still pay a minimum of $500.
The FDD specifies that the minimum royalty may be increased no more often than once every 36 months during the initial term to reflect increases in the Consumer Price Index (CPI-U) as reported by the U.S. Bureau of Labor Statistics. The calculation for any increase is based on the ratio of the current CPI-U to the baseline CPI-U at the time of the franchise agreement's effective date. This adjustment protects the franchisor from inflation while also capping how frequently the minimum royalty can increase, providing some predictability for the franchisee.
Furthermore, the FDD states that Bor Restoration will begin collecting royalties and other fees 45 days after the franchisee's opening date. This delay provides a short grace period for the franchisee to establish their business before royalty payments begin. It is also noted that the minimum royalty and percentage royalty may increase to the then-current amounts if the franchisee is awarded Successor Franchise Rights, meaning that renewing or extending the franchise agreement could result in higher royalty obligations.