When are Royalty Fees paid by a Casiola franchisee?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
Royalty Fees: Throughout the Term of this Agreement, Franchisee shall pay to Franchisor continuing nonrefundable royalty fees (individually and collectively, the "Royalty Fee") in an amount equal to 4.9% (the "Royalty Rate") of Gross Rental Revenues+, except that the Royalty Rate shall be 8% of Gross Rental Revenues+ for Out of Territory Customers. Royalty Fees shall be paid instantly in each and every instance that Gross Rental Revenues+, Gross Sales, and/or any other fees are received and/or paid in connection with the Franchised Business.
Supplemental Royalty Fee: In addition to Franchisee's Royalty Fee obligations, on a calendar year quarterly basis throughout the Term of this Agreement, if the aggregate amount of the monthly Royalty Fees paid by Franchisee during the respective calendar year quarter do not, in aggregate, equal or exceed the aggregate amount of Franchisee's Monthly Minimum Royalty Fee Requirements (defined below) applicable to the months comprising the respective calendar year quarter (calculated by combining the Monthly Minimum Royalty Fee Requirement for each month within the applicable calendar year quarter), then Franchisee must pay to Franchisor the difference as a supplemental royalty fee (the "Supplemental Royalty Fee"). In calculating and determining the Supplemental Royalty Fee, the following Monthly Minimum Royalty Fee Requirements (the "Monthly Minimum Royalty Fee Requirements") shall be applicable and are imposed on Franchisee:
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, franchisees must pay royalty fees throughout the term of the agreement. The royalty fee is 4.9% of Gross Rental Revenues+, but it increases to 8% for Out of Territory Customers. Casiola franchisees are required to pay these royalty fees instantly each time Gross Rental Revenues+, Gross Sales, and/or any other fees are received or paid in connection with the Franchised Business.
In addition to the standard royalty fees, Casiola franchisees may also be subject to a Supplemental Royalty Fee on a calendar year quarterly basis. This fee applies if the total monthly royalty fees paid during the quarter do not meet or exceed the Monthly Minimum Royalty Fee Requirements. If there is a shortfall, the franchisee must pay the difference as a Supplemental Royalty Fee.
This payment structure means that Casiola franchisees need to have systems in place to track and remit royalty fees in real-time as revenue comes in, as well as monitor their performance against the Monthly Minimum Royalty Fee Requirements to avoid additional fees at the end of each quarter. This immediate payment obligation may impact the franchisee's cash flow management, requiring careful planning to ensure timely payments.