Under what conditions might the C3 Wellness Spa Royalty Rate be increased?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
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 standard royalty rate is 6% of weekly gross sales. However, C3 Wellness Spa retains the right to adjust this rate under specific circumstances.
Specifically, if any governmental agency, law, or court order prohibits or invalidates the franchisee's payment of royalty fees based on gross sales related to services or products provided by an authorized care provider or the franchised business, C3 Wellness Spa has the option to respond in one of two ways. First, C3 Wellness Spa can increase the royalty rate applied to the permissible portion of gross sales (that is not restricted) to ensure that the net dollar amount of royalty fees remains equivalent to what they would have received without the restriction.
Alternatively, C3 Wellness Spa can modify the royalty fee to a fixed fee, according to a schedule determined by the franchisor. This adjustment is at the sole discretion of C3 Wellness Spa, providing them with flexibility in responding to regulatory changes that might impact the revenue streams on which royalty fees are calculated. This clause protects C3 Wellness Spa's revenue stream in the event of regulatory changes.