How often can Bor Restoration increase the Minimum Royalty during the Initial Term?
Bor_Restoration Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
Source: Item 23 — Receipts (FDD pages 40–202)
What This Means (2024 FDD)
According to Bor Restoration's 2024 Franchise Disclosure Document, the Minimum Royalty, which will never be less than $500, may be increased no more than once every 36 months during the Initial Term. These increases are tied to the Consumer Price Index (CPI-U) as quoted by the U.S. Bureau of Labor Statistics.
The CPI-U is used to calculate potential increases to the Minimum Royalty. Bor Restoration will determine a baseline CPI-U as of the franchise's Effective Date. If the Effective Date isn't the first day of a month, the baseline will be set on the first day of the following month. On the 36th and 72nd-month anniversaries of the Effective Date (or the first day of the month following if the anniversary isn't on the first), Bor Restoration will determine the current CPI-U.
To calculate any increase, Bor Restoration will multiply the current Minimum Royalty by a fraction. The denominator of this fraction is the Base CPI-U, and the numerator is the Current CPI-U. This mechanism ensures that royalty increases are linked to inflation, potentially affecting a franchisee's profitability over time. Franchisees should monitor the CPI-U and understand how it might impact their royalty payments during the Initial Term.