How is the monthly lease guaranty fee for a Cost Cutters Family Hair Salon calculated?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
If FRANCHISEE requests and COST CUTTERS agrees to guarantee FRANCHISEE's lease obligations in any way (e.g., as tenant or guarantor), then COST CUTTERS reserves the right to charge FRANCHISEE a monthly fee of the amount by which twelve percent (12%) of FRANCHISEE's monthly gross sales exceeds FRANCHISEE's monthly lease payments for as long as such guaranty is in effect. COST CUTTERS has no obligation to guarantee FRANCHISEE's lease in any way, but if COST CUTTERS does, FRANCHISEE must pay such monthly lease guaranty fee.
Source: Item 23 — RECEIPT (FDD pages 76–439)
What This Means (2024 FDD)
According to Cost Cutters Family Hair Salon's 2024 Franchise Disclosure Document, if a franchisee requests and Cost Cutters Family Hair Salon agrees to guarantee the franchisee's lease obligations, Cost Cutters Family Hair Salon has the right to charge a monthly fee. This guaranty is not an obligation of Cost Cutters Family Hair Salon, but an option they may exercise.
The monthly lease guaranty fee is calculated as the amount by which twelve percent (12%) of the franchisee's monthly gross sales exceeds the franchisee's monthly lease payments. This fee remains in effect for as long as the guaranty is in place.
For a prospective Cost Cutters Family Hair Salon franchisee, this means that if Cost Cutters Family Hair Salon guarantees the lease, the franchisee will pay a fee each month. This fee is based on a percentage of gross sales exceeding the base rent. This arrangement could provide some security for the landlord, but it also adds an additional cost to the franchisee's monthly expenses if the franchisee's sales are high enough.