Does Closet Storage Concepts consider royalties received as trust funds?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties received by Franchisor pursuant to this Section shall not be deemed trust funds nor shall Franchisor be required to segregate such funds in any way, but they shall be deemed general funds of Franchisor for all purposes.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, royalty fees received from franchisees are not considered trust funds. The document specifies that Closet Storage Concepts is not required to segregate these funds in any way and that the royalties are considered general funds of the company.
This means that Closet Storage Concepts has the right to use royalty payments for any business purpose they deem appropriate, without obligation to hold them separately or use them exclusively for the benefit of franchisees. This is a fairly standard practice in franchising, as royalty payments are typically a primary source of revenue for the franchisor.
For a prospective Closet Storage Concepts franchisee, this clause clarifies the financial relationship between the franchisee and franchisor. Franchisees should be aware that royalty payments become the property of Closet Storage Concepts upon payment and are not held in escrow or trust. This understanding is crucial for financial planning and assessing the overall investment in the franchise.