How is the Exit Fee calculated for a C12 Group franchisee to avoid post-termination non-competition?

Question

Accepted Answer

| u. Dispute resolution by arbitration or mediation | XII, Exhibit F | All matters can be appealed up through C12’s defined three-step dispute resolution process which culminates in Christian arbitration pursuant to which the parties engage three Bible-believing Christian arbitrators as follows: one selected by the franchisee, one selected by C12, and one selected by such two arbitrators. The remedy recommended by the arbitration panel will be binding and final with no further recourse by either party. Subject to state law. |
|---|---|---|
| v. Choice of forum | XII, Exhibit F | Litigation must be conducted in Texas unless otherwise stated in Exhibit F for certain State Disclosures (subject to applicable state law). |
| w. Choice of Law | XII | Texas law will govern (subject to applicable state law). |
| C12 Franchisees |  |  |
| Total Revenue |  |  |
| January 1, 2024 to December 31, 2024 |  |  |
| Total Revenue | $44,250,036 | Reported by 65 franchisees. |
| m. Conditions for franchisor approval of transfer | X | New franchisee qualifies, transfer fee of \$6,000 paid, purchase agreement approved, training completed, all outstanding accounts receivable satisfied, release signed by you and current agreement signed by new franchisee (also see r. below). |
| n. Franchisor's right of | Not Applicable | C12 does not require right of first refusal, but must |
| first refusal to acquire |  | approve owner/operator and may, on occasion, take |
| franchisee's business |  | ownership if necessary. |
| o. Franchisor's option to purchase franchisee's business | X | If you ask C12 to purchase your business or you have not actively tended to the Territory for 60 days or more, C12 has the right to purchase or, in certain instances, regain the rights to the Territory at no cost. Subject to state law. |
| p. Death or disability of franchisee | X | Franchise must be assigned by estate to a C12- approved buyer within six months of your involuntary physical departure from the practice to qualify as a transfer. |
| q. Non-competition covenants during the term of the franchise | I, IV, IX | No involvement in a business of competing or contrary purpose while a franchisee. Subject to state law. |
| r. Non-competition covenants after the franchise is terminated or expires | I, IV, VIII, XV | For two (2) years after the termination of the Franchise Agreement for any reason, Franchisee shall not directly or indirectly own an interest in or otherwise be employed by or engaged with a Competitive Business within the Territory, within ten (10) miles of the Territory, within the territory of any other C12 franchise, or within ten (10) miles of the territory of any other C12 franchise, subject to state law. For purposes of this Section, a "Competitive Business" is any business that offers peer mentorship and coaching to Christian business leaders. The post termination non-competition obligations under this Section shall not apply if Franchisee pays Franchisor the Exit Fee described above. The Exit Fee is equal to the average Royalty owed to C12 over the three (3) months preceding termination multiplied by twelve (12). Subject to state law.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 36–40)

How is the Exit Fee calculated for a C12 Group franchisee to avoid post-termination non-competition?

Answer from 2025 FDD Document

What This Means (2025 FDD)

u. Dispute resolution by arbitration or mediation	XII, Exhibit F	All matters can be appealed up through C12’s defined three-step dispute resolution process which culminates in Christian arbitration pursuant to which the parties engage three Bible-believing Christian arbitrators as follows: one selected by the franchisee, one selected by C12, and one selected by such two arbitrators. The remedy recommended by the arbitration panel will be binding and final with no further recourse by either party. Subject to state law.
v. Choice of forum	XII, Exhibit F	Litigation must be conducted in Texas unless otherwise stated in Exhibit F for certain State Disclosures (subject to applicable state law).
w. Choice of Law	XII	Texas law will govern (subject to applicable state law).
C12 Franchisees
Total Revenue
January 1, 2024 to December 31, 2024
Total Revenue	$44,250,036	Reported by 65 franchisees.
m. Conditions for franchisor approval of transfer	X	New franchisee qualifies, transfer fee of $6,000 paid, purchase agreement approved, training completed, all outstanding accounts receivable satisfied, release signed by you and current agreement signed by new franchisee (also see r. below).
n. Franchisor's right of	Not Applicable	C12 does not require right of first refusal, but must
first refusal to acquire		approve owner/operator and may, on occasion, take
franchisee's business		ownership if necessary.
o. Franchisor's option to purchase franchisee's business	X	If you ask C12 to purchase your business or you have not actively tended to the Territory for 60 days or more, C12 has the right to purchase or, in certain instances, regain the rights to the Territory at no cost. Subject to state law.
p. Death or disability of franchisee	X	Franchise must be assigned by estate to a C12- approved buyer within six months of your involuntary physical departure from the practice to qualify as a transfer.
q. Non-competition covenants during the term of the franchise	I, IV, IX	No involvement in a business of competing or contrary purpose while a franchisee. Subject to state law.
r. Non-competition covenants after the franchise is terminated or expires	I, IV, VIII, XV	For two (2) years after the termination of the Franchise Agreement for any reason, Franchisee shall not directly or indirectly own an interest in or otherwise be employed by or engaged with a Competitive Business within the Territory, within ten (10) miles of the Territory, within the territory of any other C12 franchise, or within ten (10) miles of the territory of any other C12 franchise, subject to state law. For purposes of this Section, a "Competitive Business" is any business that offers peer mentorship and coaching to Christian business leaders. The post termination non-competition obligations under this Section shall not apply if Franchisee pays Franchisor the Exit Fee described above. The Exit Fee is equal to the average Royalty owed to C12 over the three (3) months preceding termination multiplied by twelve (12). Subject to state law.