What is the franchisee obligated to do regarding minimum annual revenue for their Craters & Freighters territory?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
| Year of Operation | Minimum Performance Standard | Minimum Monthly Royalty Fee |
|---|---|---|
| 1 | $200,000 | $0 |
| 2 | $400,000 | $1,667 |
| 3 | $510,000 | $2,125 |
At the end of year 3, we will determine the Minimum Performance Standards and Minimum Monthly Royalty Fees for years 4-15 of the Franchise Agreement and you will be provided with an amendment to your Franchise Agreement. We will base our decision on population, demographic factors, economic factors, competition, market penetration, the growth rate of other Craters & Freighters Franchised Businesses, and other relevant factors. If you are entering into a Successor Franchise Agreement, we will determine the Minimum Performance Standards and Minimum Monthly Royalty for your successor term.
Your failure or refusal to satisfy your Minimum Performance Standards may result in the reduction or modification of your Territory. These Minimum Performance Standards are not, and should not be considered, financial performance representations for your Franchised Business.
You may only solicit business in the Territory for the purpose of obtaining customers who reside or operate within the Territory, and you cannot knowingly solicit business outside of the Territory.
Source: Item 12 — TERRITORY (FDD pages 29–32)
What This Means (2025 FDD)
According to Craters & Freighters's 2025 Franchise Disclosure Document, franchisees must meet minimum annual revenue requirements, referred to as "Minimum Performance Standards," for their designated territory. For the first three years of operation, these standards are clearly defined. Specifically, in year 1, the Minimum Performance Standard is $200,000. This increases to $400,000 in year 2, and further to $510,000 in year 3. During these initial years, the Minimum Monthly Royalty Fee also increases from $0 in year 1 to $1,667 in year 2 and $2,125 in year 3.
After the initial three-year period, Craters & Freighters will determine the Minimum Performance Standards and Minimum Monthly Royalty Fees for years 4 through 15 of the Franchise Agreement. These future standards will be outlined in an amendment to the Franchise Agreement and will be based on factors such as population, demographics, economic conditions, competition, market penetration, and the growth rate of other Craters & Freighters franchises. This means that a franchisee's revenue targets and royalty obligations could change based on the performance of the franchise and broader market conditions.
Failure to meet the Minimum Performance Standards can have consequences, including the potential reduction or modification of the franchisee's territory. However, the FDD explicitly states that these Minimum Performance Standards should not be considered financial performance representations for the franchised business. This suggests that while meeting these standards is important for maintaining the territory, it does not guarantee overall financial success. Prospective franchisees should carefully consider these requirements and how they align with their business goals and market conditions.