What royalty payments are used to calculate the Exit Fee for C12 Group?
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 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 36–40)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, the Exit Fee is calculated based on the average royalty fees paid to C12 Group over the three months preceding the franchisee's notice of termination, multiplied by twelve. This fee is applicable if the franchisee terminates the agreement without fault of the franchisor and intends to engage in a competitive business serving the same customers who were members in the franchisee's C12 Group franchised business.
In practical terms, this means that if a franchisee decides to terminate their agreement and then starts a similar business that targets the same client base as C12 Group, they will be required to pay this exit fee. The fee is essentially a year's worth of average royalty payments, based on the three months prior to termination. This could be a substantial amount, depending on the franchisee's recent revenue and the applicable royalty rates during those months.
This exit fee serves as a protective measure for C12 Group, preventing franchisees from directly competing with them immediately after leaving the system and potentially taking C12 Group's members with them. Prospective franchisees should carefully consider this clause, as it could represent a significant financial obligation if they decide to terminate the agreement and enter into a competing business. It is important to understand the circumstances under which this fee applies and to factor it into any decision to terminate the franchise agreement.