What is the definition of 'Exit Fee' for C12 Group franchisees as it relates to royalty fees?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
| then you do not pay or otherwise reimburse C12 for its cost of sending a representative. | |||
|---|---|---|---|
| Member Registration | Currently: CEO - $550 Key Players - $330 | Upon sign-up | Enrolls member and provides start-up kit. See Item 12 of this FDD for definitions of CEO and Key Player membership. This is amount due to C12, franchisee may charge more to the new member. |
| Transfer Fee | $6,000 | On date of transfer | Transfers of franchises are subject to C12's prior approval. |
| Exit Fee | The average Royalty Fees paid to us over the three (3) months preceding your notice of termination multiplied by twelve (12) | Upon termination by the franchisee, if applicable. | If Franchisee terminates this Agreement due to no fault of Franchisor and Franchisee engages in or intends to engage in a competitive business serving the same customers who were otherwise engaged as members in Franchisee's C12 Franchised Business, Franchisee shall pay Franchisor an exit fee equal to (a) the average Royalty Fees paid to Franchisor over the three (3) months preceding Franchisee's notice of termination (b) multiplied by twelve (12) ("Exit Fee"). |
Source: Item 6 — OTHER FEES (FDD pages 12–17)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, an Exit Fee is applicable if a franchisee terminates the agreement without fault of the franchisor and then engages in a competitive business that serves the same customers who were members of the franchisee's C12 franchised business.
The Exit Fee is calculated by averaging the royalty fees paid to C12 Group over the three months preceding the termination notice. This average is then multiplied by twelve. This Exit Fee is designed to compensate C12 Group for the loss of future royalty income from the franchisee's territory if the franchisee starts a competing business.
This fee is only applicable if the franchisee terminates the agreement and starts a competing business. It would not apply if the franchisor terminated the agreement or if the franchisee exited the C12 Group system without starting a competing business. Prospective franchisees should consider this potential cost when evaluating the franchise opportunity and ensure they understand the circumstances under which the Exit Fee would be levied.