What happens if a tax is imposed on the Royalty Fee that Casiola cannot offset?

According to Casiola's 2024 Franchise Disclosure Document, if any federal, state, or local tax other than income tax is imposed on the Royalty Fee, and Casiola cannot directly offset it against taxes required to be paid under applicable federal or state laws, the franchisee must compensate Casiola. This compensation will be in a manner prescribed by Casiola to ensure that the net amount or net effective royalty fees received by Casiola is not less than 4.9% of the Gross Rental Revenues+.

In simpler terms, if a new tax is levied on the royalty fees that Casiola receives from its franchisees, and Casiola cannot reduce its own tax obligations to account for this new tax, the franchisee will have to cover the cost of the tax. This ensures that Casiola continues to receive its full royalty payment, equivalent to 4.9% of the franchisee's Gross Rental Revenues+.

This provision protects Casiola from bearing the burden of unexpected taxes on royalty fees. However, it places the financial risk of such taxes directly on the franchisee, potentially reducing their profitability. Prospective franchisees should consider this potential liability when evaluating the overall cost of investing in a Casiola franchise and should seek clarification on how such compensation would be calculated and implemented.