Under what condition does a terminating C12 Group franchisee have to pay an Exit Fee?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee may terminate this Agreement by ninety (90) days' written notice to Franchisor subject to the process described below. In keeping with the principles of transparency and walking mutually "in the light" of Scripture together that has led Franchisor and Franchisee to enter into this Agreement, prior to giving Franchisor written notice of termination, Franchisee must attend the next available Semi-Annual Chair Training and communicate Franchisee's reasons for termination to the other franchisees and Area Chairs in attendance. After receiving feedback from other franchisees and Area Chairs, Franchisee may thereafter terminate this Agreement without cause. 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 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, a franchisee may be required to pay an exit fee if they terminate the agreement and subsequently engage in a competitive business. Specifically, if the franchisee terminates the agreement due to no fault of C12 Group and then engages or intends to engage in a competitive business serving the same customers who were members in the franchisee's C12 Group franchise, an exit fee is required.
The exit fee is calculated by averaging the Royalty Fees paid to C12 Group over the three months preceding the franchisee's notice of termination and then multiplying that average by twelve. This fee is designed to compensate C12 Group for the potential loss of revenue and market share resulting from the franchisee's decision to compete directly with the franchise system after terminating the agreement.
This condition is important for prospective franchisees to consider, as it could represent a significant financial obligation if they decide to leave the C12 Group system and start a competing business. It is advisable for potential franchisees to carefully evaluate their long-term plans and consider the potential implications of this exit fee before entering into a franchise agreement with C12 Group. Understanding this obligation can help franchisees make informed decisions about their business strategy and future career path.