Will the royalty fees for a Closet Storage Concepts franchise remain the same upon renewal?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
2.4 Conditions for Renewal Option.Franchisee shall have the right to exercise the renewal option referred to in Section 2.2 above provided that all of the following conditions have been satisfied:
2.4.1 Franchisee shall repair or replace, at Franchisee's cost and expense, equipment (including electronic cash register or computer hardware or software systems), signs, interior and exterior decor items, fixtures, or furnishings, supplies and other products and materials required for the operation of the Closet & Storage Concepts business as Franchisor may reasonably require and shall obtain, at Franchisee's cost and expense, any new or additional equipment, fixtures, supplies and other products and materials which may be reasonably required by Franchisor for Franchisee to offer and sell new products and services from the Closet & Storage Concepts business and shall otherwise modernize the business' premises, equipment (including electronic cash register or computer hardware and software systems), signs, interior and exterior decor items, fixtures, furnishings and supplies and other products and materials required for the operation of the Closet & Storage Concepts business as reasonably required by Franchisor to reflect the then current standards and image of the System as contained in the Operations Manual or otherwise provided in writing by Franchisor; and
2.4.2.
Franchisee shall present satisfactory evidence that Franchisee has the right to remain in possession of the premises at the Approved Location or obtain Franchisor's approval of a new site for the operation of the Approved Location for the duration of the renewal term of this Agreement.
- 2.4.3 Franchisee has executed a release of any and all claims against Franchisor and its parents, affiliates, and their equity owners, officers, directors, agents, employees, attorneys and accountants arising out of or related to this Agreement or any related agreement.
The release shall contain language and be of the form chosen by Franchisor, except the release shall not release any liability specifically provided for by any applicable state statute regulating franchising.
Our current form of release is attached to this Agreement as Exhibit "5".
- 2.4.4 All amounts to be paid by Franchisee to Franchisor and/or its affiliates are currently paid, and no default under this Agreement exists uncured five (5) days after the Franchisee has received written notice of any overdue amounts.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the royalty fees for a Closet Storage Concepts franchise may not remain the same upon renewal. The document outlines conditions for renewal, including the franchisee meeting the brand's current standards. Specifically, the franchisee must modernize the business's premises, equipment, signs, and overall image to reflect the then-current standards of the Closet & Storage Concepts system, as detailed in the Operations Manual or provided in writing by the franchisor.
While the FDD does not explicitly state that the royalty fee will change, it does state that the franchisee must adhere to the current standards of the Closet Storage Concepts system. These standards could include changes to the royalty fee structure. Franchisees must also present evidence that they can remain in possession of the premises or secure a new approved site for the duration of the renewal term. Additionally, franchisees must execute a release of claims against Closet Storage Concepts and its affiliates.
To ensure renewal, a franchisee must be current on all payments to Closet Storage Concepts and not be in default of the agreement. The franchisor also has the right to modify the Closet Storage Concepts system, which may affect the franchisee's costs. Therefore, while the royalty fee is currently 5% of gross revenues, it is subject to change upon renewal to reflect the 'then current standards and image of the System'.
In summary, while the FDD does not guarantee a change in royalty fees upon renewal, it also does not guarantee that they will remain the same. The franchisee should clarify with Closet Storage Concepts whether the royalty fee structure is subject to change upon renewal and under what conditions such changes might occur.