If the C12 Group operates the franchised business after termination, what compensation does the franchisee receive?
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 FDD, if C12 Group terminates the Franchise Agreement for cause and chooses to operate the franchised business, the franchisee will receive a "Step-In Payment." This payment is equivalent to fifty percent (50%) of the Net Operating Income of the franchised business for three (3) months.
The FDD specifies that "Net Operating Income" is calculated by taking the Gross Revenue of the franchised business and subtracting two items: (i) the royalty fees that the franchisee would have paid to C12 Group had the agreement not been terminated, and (ii) all other expenses incurred by C12 Group while operating the franchised business.
However, the FDD also states that if C12 Group decides to close the franchised business instead of selling it, the franchisee will not receive any compensation. If C12 Group sells the franchised business within three months of the termination, the franchisee will receive the amount C12 Group receives for the business, minus the Step-In Payment already paid to the franchisee. This clause ensures that the franchisee may receive some compensation from the sale of the business, but it is contingent on C12 Group's decision to sell and the timing of such a sale.