Under what condition can Cool Binz reset a franchisee's royalty to 9%?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
deemed fully earned upon payment and non-refundable under any circumstances.
C. ROYALTY.
You shall pay us a monthly royalty (the "Royalty") equal to nine percent (9%) of Gross Sales, as defined below in Section 2.D. Beginning in month thirteen (13) of operations, if the percentage Royalty is less than $1,000, then you will be required to pay the minimum monthly royalty of $1,000 instead. You shall pay us a Royalty equal to nine percent (9%) of your Gross Sales until your Gross Sales exceed $500,000 in a calendar year. Once you exceed $500,000 in Gross Sales in a calendar year, your Royalty will decrease to eight percent (8%) of Gross Sales for the remainder of the calendar year, plus the entire following calendar year. If you fail to achieve over $500,000 in Gross Sales in the following calendar year, your Royalty will revert to 9%. If for any reason you are not in compliance with the Franchise Agreement, we reserve the right to reset the Royalty to nine percent (9%) for the remainder of the
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, the standard royalty fee is 9% of gross sales. However, Cool Binz offers a reduced royalty rate of 8% once a franchisee's gross sales exceed $500,000 in a calendar year. This reduced rate applies for the remainder of that year and the entire following calendar year. To maintain the reduced 8% royalty, the franchisee must continue to exceed $500,000 in gross sales each subsequent calendar year.
Cool Binz reserves the right to revert the royalty back to 9% if a franchisee fails to achieve over $500,000 in gross sales in the year following the initial qualification. This means that franchisees need to consistently perform above this threshold to maintain the lower royalty rate. The FDD also states that if a franchisee is not in compliance with the Franchise Agreement for any reason, Cool Binz can reset the royalty to 9% for the remainder of the calendar year.
If the royalty rate is reset to 9% due to non-compliance, the franchisee must then re-qualify for the discounted royalty in the following year by again exceeding the $500,000 gross sales threshold. This provision underscores the importance of adhering to the Franchise Agreement and maintaining a high level of sales performance to avoid increased royalty fees. For a prospective franchisee, this means understanding all aspects of the Franchise Agreement and having a solid business plan to achieve and maintain the required sales targets.