How are royalty payments handled by Closet Storage Concepts?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
livery of this Agreement by Franchisor. Except as herein expressly provided, said Initial Franchise Fee shall not be refunded, in whole or in part, upon any termination of this Agreement nor under any other circumstances whatsoever.
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
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, franchisees must pay a royalty fee equal to 5% of their weekly gross revenues, with a minimum payment of $125.00 per week. If a franchisee operates multiple locations within a single territory, the gross revenues from all locations are combined to calculate the royalty fee. If the franchise agreement starts or ends mid-week, the royalty for that partial week is based only on the gross revenue earned during the portion of the week the agreement was in effect. Gross revenue includes all revenue from sales, services, and installation charges, but excludes sales taxes, use taxes, gross revenue taxes, and bona fide refunds, rebates, and discounts. These royalty payments are considered general funds of Closet Storage Concepts and are not held in trust or segregated.
Closet Storage Concepts requires franchisees to participate in an electronic funds transfer (EFT) program for royalty payments. Under this program, Closet Storage Concepts automatically deducts the weekly royalty and other payments from the franchisee's bank account. Franchisees must provide the necessary banking documents to facilitate this program before opening their business. Franchisees are also responsible for promptly notifying Closet Storage Concepts of any changes to their banking relationship, such as changes in account numbers. Closet Storage Concepts retains the right to modify the EFT agreement and may require franchisees to use the then-current form.
Closet Storage Concepts also reserves the right to specify the form and manner of all payments due from the franchisee. Weekly payments are due and deducted from the franchisee's bank account every Monday for the receipts of the preceding week, unless Closet Storage Concepts mandates a different day. This electronic funds transfer system is a fairly standard practice in franchising, ensuring timely and consistent royalty payments to the franchisor. Franchisees should ensure they understand the EFT agreement and maintain sufficient funds in their account to cover the weekly royalty payments to avoid any penalties or disruptions.