How is the adjusted fee calculated by Chop5 Salad Kitchen when CPI changes warrant an adjustment?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
We reserve the right to periodically adjust all fees expressed as a fixed dollar amount based on changes to the Consumer Price Index (CPI) in the United States.
We may review these fees every every two (2) years and increase the fees based on CPI changes, but only if the then-current CPI ("Current CPI") is more than 5% higher than the corresponding CPI in effect on: (a) the Effective Date of this Agreement (for the initial fee adjustments); or (b) the date we implemented the last fee adjustment (for subsequent fee adjustments) ("Baseline CPI").
The adjusted fee shall be calculated by multiplying the current fee by a fraction: (a) the numerator of which is an amount calculated as the product of (i) 100 and (ii) the difference of Current CPI minus Baseline CPI; and (b) the denominator of which is Baseline CPI.
We may utilize any CPI index series published by the U.S. Department of Labor or any comparable Governmental Authority that we deem appropriate.
We currently use the following index: All Urban Wage Earners and Clerical Workers (CPI-W), U.S. City Average (1982-84 = 100), "All Items".
We will notify you of any CPI adjustment at least 60 days before the fee adjustment becomes effective.
If we, in our sole discretion, determine not to increase the fees in a given two-year period despite a 2% or greater
CPI increase, that potential fee increase will accumulate and may be carried forward and applied in connection with a subsequent fee adjustment.
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen FDD, Chop5 Salad Kitchen reserves the right to adjust fixed dollar amount fees periodically based on changes to the Consumer Price Index (CPI) in the United States. These fees may be reviewed every two years and increased based on CPI changes, but only if the Current CPI is more than 5% higher than the Baseline CPI. The Baseline CPI is defined as the CPI in effect on the agreement's effective date for initial adjustments, or the date of the last fee adjustment for subsequent adjustments.
The adjusted fee is calculated by multiplying the current fee by a fraction. The numerator of this fraction is the product of 100 and the difference between the Current CPI and the Baseline CPI. The denominator of the fraction is the Baseline CPI. Chop5 Salad Kitchen may use any CPI index series published by the U.S. Department of Labor or a comparable Governmental Authority. Currently, Chop5 Salad Kitchen uses the All Urban Wage Earners and Clerical Workers (CPI-W), U.S. City Average (1982-84 = 100), "All Items" index.
Chop5 Salad Kitchen will notify franchisees of any CPI adjustment at least 60 days before it takes effect. If Chop5 Salad Kitchen chooses not to increase fees in a given two-year period despite a qualifying CPI increase, that potential increase can accumulate and be applied in a later fee adjustment. This policy allows Chop5 Salad Kitchen to maintain some flexibility in adjusting fees, but it also means that franchisees could face larger fee increases in the future if CPI continues to rise.