How often can the minimum royalty be increased for a Bor Restoration franchise?
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.
- c. The Minimum Royalty and Percentage Royalty may increase to the then-current amounts if you are awarded Successor Franchise Rights.
- d. We will begin collecting Royalties and other fees due to us 45 days after your Opening Date.
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) for all urban consumers, using the base period of 1982-1984, as reported by the U.S. Bureau of Labor Statistics.
The timing for determining potential increases is based on the Effective Date of the franchise agreement. The Base CPI-U is determined as of the Effective Date, or if the Effective Date isn't the first day of a month, then 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 those anniversaries if they don't fall on the first of the month), the then-current CPI-U is determined.
The increase in the minimum royalty, if any, is calculated by multiplying 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 means that the minimum royalty can only increase to reflect increases in the CPI-U, providing a built-in mechanism to adjust for inflation during the term of the franchise agreement.
It is important to note that the minimum royalty and percentage royalty may also increase to the then-current amounts if the franchisee is awarded Successor Franchise Rights. Royalties and other fees are collected starting 45 days after the franchisee's Opening Date.