What constitutes 'Gross Billings' for C12 Group royalty fee calculation?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
While Franchisee's monthly Royalty Fee is established solely based on each month's membership roster and billings, Franchisee is solely responsible for invoicing and collecting registration fees and membership fees from Franchisee's members and setting collections policies and standards.
Franchisee will pay Franchisor Royalty Fees based on Franchisee's membership roster and billings regardless of whether Franchisee actually collects the registration and/or membership fees from its members.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to C12 Group's 2025 Franchise Disclosure Document, the franchisee's monthly Royalty Fee is based on the membership roster and billings for each month. The franchisee is responsible for invoicing and collecting registration fees and membership fees from their members, as well as setting collections policies and standards. However, C12 Group franchisees must pay royalty fees based on their membership roster and billings, regardless of whether they actually collect the registration and/or membership fees from their members. This means that the royalty fee is calculated on the total amount billed to members, not just on the amount the franchisee has successfully collected.
The royalty fees for C12 Group are structured as follows: 30% of gross billings up to $13,000, 27.5% for billings between $13,001 and $26,000, 25% for billings between $26,001 and $40,000, 22.5% for billings between $40,001 and $60,000, 20% for billings between $60,001 and $80,000, and 17.5% for billings exceeding $80,001. This tiered structure means that as a franchisee's gross billings increase, the percentage paid in royalty fees decreases, incentivizing growth.
This policy has important implications for prospective franchisees. It means that franchisees need to have effective billing and collection processes in place to minimize uncollected revenue, as they are still responsible for paying royalties on those amounts. Franchisees should factor potential uncollected revenue into their financial projections and business planning. Additionally, franchisees should be aware of the potential impact of economic conditions on their members' ability to pay and adjust their strategies accordingly.
In the franchise industry, it is common for royalty fees to be based on gross sales or revenue, but the specific definition of what constitutes 'gross sales' can vary. Some franchises may exclude certain items, such as sales tax or discounts, from the calculation. Therefore, it is important for prospective franchisees to carefully review the franchise agreement and understand how gross billings are defined and calculated for royalty fee purposes.