What receipts are royalty payments based on for a Closet Storage Concepts franchise?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3.3 Royalty Fee.
3.3.1 Royalty Based on Gross Revenue. Franchisee agrees to pay to Franchisor in accordance with Section 3.3.3, during the term of this Agreement, 5% of all weekly Gross Revenues of the Franchised Business subject to a minimum of $125.00 per week. The Gross Revenues of all of Franchisee's locations within a single Territory are aggregated for purposes of determining the correct Royalty Fee. If
the term of this Agreement commences or ends on the day other than the first or last day of a week, respectively, the royalty for such week shall be based on Gross Revenue for the portion of the week commencing or ending with the date of commencement or termination of the term of this Agreement, as the case may be.
- 3.3.2 "Gross Revenue" Defined.
For the purpose of this Agreement, above, the term "Gross Revenue" is defined as the total gross revenue derived by Franchisee from the operation of Franchisee's Closet & Storage Concepts business whether from sales for cash or credit, including sales of both products and services, and including installation charges, exclusive of all sales taxes, use taxes, Gross Revenue taxes and other similar taxes added to the sales price and collected from the customer, and less any bona fide refunds, rebates, and discounts.
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.
- 3.3.3 Manner of Payment.
Franchisee shall participate in Franchisor's electronic funds transfer program under which Franchisor automatically deducts the weekly royalty and other payments owed to Franchisor under this Agreement from Franchisee's bank account.
Before opening, Franchisee shall sign and give to Franchisor's bank all documents necessary to effectuate this program.
Franchisee shall immediately notify Franchisor of any change in Franchisee's banking relationship, including changes in account numbers.
Franchisor may require that Franchisee execute its then-current form of electronic funds transfer agreement, a copy of which is attached hereto as Exhibit 12.
Franchisor reserves the right to require Franchisee to submit all payments due to Franchisor or its affiliates arising out of or related to the Franchised Business in any form or manner Franchisor prescribes.
All weekly payments required under this section shall be due and deducted from Franchisee's bank account on Monday of each week on the receipts for the preceding week or such other day as Franchisor mandates.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the royalty fee is based on a percentage of gross revenue. Franchisees must pay Closet Storage Concepts 5% of all weekly Gross Revenues, subject to a minimum of $125.00 per week. If a franchisee has multiple locations within a single territory, the gross revenues of all locations are combined to calculate the royalty fee. If the agreement starts or ends mid-week, the royalty is based only on the gross revenue earned during the portion of that week that the agreement was in effect.
The FDD defines "Gross Revenue" as the total revenue a Closet Storage Concepts franchisee earns from operating their business. This includes all sales, whether they are cash or credit transactions, for both products and services. Installation charges are also included in gross revenue. However, sales taxes, use taxes, gross revenue taxes, and other similar taxes that are added to the price and collected from customers are excluded from gross revenue. Additionally, any legitimate refunds, rebates, and discounts can be deducted from the gross revenue total.
Closet Storage Concepts requires franchisees to participate in an electronic funds transfer program. Under this program, the franchisor automatically deducts the weekly royalty and other payments owed from the franchisee's bank account. These deductions typically occur on Mondays for the receipts of the preceding week, although Closet Storage Concepts retains the right to change the day on which these deductions are made. Franchisees must provide all necessary banking documents to facilitate this program before opening their business and must notify Closet Storage Concepts of any changes to their banking relationship, such as changes in account numbers.