When is the C3 Wellness Spa Royalty Fee due?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
5.B. ROYALTY FEES
Royalty Fee: Throughout the Term of this Agreement, Franchisee shall pay to Franchisor a continuing weekly non-refundable royalty fee (the "Royalty Fee") in an amount equal to 6% (the "Royalty Rate") of Franchisee's weekly Gross Sales throughout the Term of this Agreement. Without limitation to the foregoing, Franchisee agrees that if the Franchised Business is operated as a Spa Management Business that the Gross Sales shall not be limited to sales and revenue related to the Spa Facility and Management Services but, shall also include, among other things, Gross Sales related to the Spa Location Franchise including sales and revenues from the Approved Spa Products and Services.
Notwithstanding the foregoing, Franchisor and Franchisee further agree that if any federal, state, and/or local government agency, entity, law, rule and/or regulation, and/or any court order or order from any legal proceeding prohibits and/or invalidates, Franchisee's payment of royalty fees based on Gross Sales related to services and/or products related to and/or associated with services performed by and/or administered by an Authorized Care Provider and/or the Franchised Business, then Franchisor, at Franchisor's election and in Franchisor's sole discretion, may either:
- (a) increase the Royalty Rate, as applied to the permissible portion of the Gross Sales that is not otherwise restricted or prohibited, to a rate determined by Franchisor so that the net dollar amount of the Royalty Fees paid by Franchisee to Franchisor shall not be less than the Royalty Fees that Franchisor would have received had the federal, state, and/or local government agency, entity, law, rule and/or regulation not prohibited Franchisee's payment of royalty fees based on Gross Sales related to a restricted activity; or
- (b) modify the Royalty Fee to a fixed fee Royalty Fee to be charged to and paid by Franchisee to Franchise in accordance with the following schedule (the "Franchisor's Optional Fixed Fee Royalty Fee"):
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
According to C3 Wellness Spa's 2024 Franchise Disclosure Document, the Royalty Fee is a continuing weekly non-refundable fee. This fee is calculated as 6% of the franchisee's weekly Gross Sales throughout the term of the agreement.
For a prospective C3 Wellness Spa franchisee, this means that every week, 6% of their total sales revenue must be paid to the franchisor as a royalty. This is a standard practice in franchising, where franchisees contribute a percentage of their sales to support the brand and receive ongoing support from the franchisor.
However, the FDD also states that if any government agency or legal proceeding prohibits the payment of royalty fees based on Gross Sales related to services performed by an Authorized Care Provider, C3 Wellness Spa has the option to either increase the Royalty Rate on the permissible portion of Gross Sales or modify the Royalty Fee to a fixed fee. This modification would be at the discretion of C3 Wellness Spa.
This clause introduces a potential risk for franchisees, as the royalty rate or fee structure could change based on external factors. It is important for prospective franchisees to understand these potential changes and how they might impact their profitability. Franchisees should seek clarification from C3 Wellness Spa regarding the conditions under which these changes would be implemented and how the new rates or fees would be determined.