How does the royalty fee structure for C12 Group franchises in Item 6 incentivize franchisees to provide high-quality services to their members?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
counting principles generally accepted in the United States (GAAP). The financial statements were presented on a consolidated basis and all significant intercompany accounts and transactions eliminated.
Revenue Recognition: A majority of the Company's revenues are derived from franchise fees. Franchise agreements generally require the franchisee to pay 1) an initial non-refundable territory fee of $25,000 per franchise unit, 2) a prepaid marketing deposit of $10,000, 3) a training and support fee of $10,000 to $12,500, which is refundable prior to the start of training, 4) continuing fees ba
What This Means (2025 FDD)
Based on the 2025 C12 Group Franchise Disclosure Document, the royalty fee structure is tied to the franchisee's monthly member billings, which directly incentivizes franchisees to provide high-quality services. The FDD states that franchisees pay "continuing fees based upon a percentage of monthly member billings ranging from 12% to 30%." This means that the more a franchisee bills its members each month, the higher the royalty fees they pay to C12 Group.
This structure motivates franchisees to focus on member satisfaction and retention. If members are satisfied with the services provided by C12 Group, they are more likely to continue their membership and pay their monthly dues. This, in turn, increases the franchisee's monthly billings and, consequently, the royalty fees paid to C12 Group. Therefore, it is in the franchisee's best interest to ensure that members receive valuable services and remain engaged in the C12 Group program.
Furthermore, the FDD mentions that C12 Group membership is limited to Christian business owners, CEOs, Presidents, and General Managers who agree to group confidentiality, Christian conflict resolution, and being part of a peer group process. This focus on a specific type of member and a commitment to certain values suggests that C12 Group places a high emphasis on the quality of its membership and the services provided. The royalty fee structure reinforces this emphasis by rewarding franchisees who can maintain a strong and engaged membership base through the delivery of high-quality services.