What happens to the franchisee's compensation if the C12 Group closes the franchised business after termination?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
If this Agreement is terminated by Franchisor for cause, Franchisor may, in its sole discretion, choose to continue to operate the Franchised Business with a Chair or other representative designated by Franchisor, which may involve another C12 franchisee.
In the event that Franchisor assumes the operation of the Franchised Business as described herein, Franchisor shall pay Franchisee fifty percent (50%) of the Net Operating Income of the Franchised Business for three (3) months (the "Step-In Payment").
The "Net Operating Income" means the Gross Revenue of the Franchised Business less (i) payment of the Royalty Fees to Franchisor that Franchisee would have paid but for the termination of this Agreement and (ii) all other expenses incurred by Franchisor while operating the Franchised Business.
Franchisor may, in its sole discretion, attempt to sell the Franchised Business, but Franchisor shall have no obligation to do so.
If Franchisor does not sell or otherwise decides to close the Franchised Business, there will be no compensation to Franchisee.
If Franchisor sells the Franchised Business within three (3) months of termination of this Agreement, Franchisor will pay Franchisee the amount that Franchisor receives for the Franchised Business less the Step-In Payment that Franchisor has already paid to Franchisee.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, if C12 Group terminates the Franchise Agreement for cause, it has the option to operate the franchised business using a Chair or another representative, potentially another franchisee. If C12 Group takes over operations, the franchisee will receive 50% of the Net Operating Income for three months, referred to as the "Step-In Payment." Net Operating Income is defined as the Gross Revenue less royalty fees that would have been paid to C12 Group and all other expenses incurred by C12 Group while operating the business.
C12 Group has the discretion to attempt to sell the franchised business, but is not obligated to do so. If C12 Group sells the business within three months of the termination, the franchisee will receive the sale amount less the Step-In Payment already received.
However, if C12 Group decides to close the franchised business instead of selling it, the franchisee will not receive any further compensation. This means the franchisee's income stream ceases entirely if C12 Group opts to discontinue the business post-termination. This is a significant risk for franchisees, as their potential for recouping investment or future earnings is contingent on C12 Group's decision to either operate, sell, or close the business.