What is the required action regarding the Craters & Freighters Royalty Fee?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges and agrees that it is obligated to pay Royalty Fees to Franchisor, in accordance with Section 3.2 of this Agreement, on all Adjusted Gross Sales (as hereafter defined) from customers residing or operating within the Territory and any Adjacent Territory.
Franchisor reserves the right to collect the Royalty Fee more frequently (e.g., weekly) upon thirty (30) days' prior written notice to Franchisee. Non-payment of any Royalty Fees will be deemed a default under this Agreement and will provide Franchisor a basis to terminate this Agreement. "Adjusted Gross Sales" means the total of all amounts received from customers for services performed and products sold from, at or in connection with Franchisee's Franchised Business, or arising out of the operation or conduct of business by Franchisee's Franchised Business, including sales made at or away from the Premises, whether such amounts are paid by cash, credit, checks, gift certificates, coupons, services, property or other means of exchange, but excluding all federal, state or municipal sales or services taxes collected from customers and paid to the appropriate taxing authority.
- 20.1 Required Actions. In the event of the termination of this Agreement, whether by reason of default, lapse of time, or other cause, Franchisee must immediately complete all of the following:
- 20.1.1 Payment of Monies Owed. Franchisee must pay to Franchisor, or any Affiliate of Franchisor, as the case may be, all monies owed to Franchisor or such Affiliate(s), respectively, within ten (10) days of the date on which the Agreement was terminated or expired.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, franchisees must pay royalty fees on all Adjusted Gross Sales from customers within their territory and any adjacent territory. Adjusted Gross Sales includes all revenue from services and products, whether paid in cash, credit, or other means, but excludes sales taxes collected and remitted to the appropriate authorities. Craters & Freighters retains the right to collect the royalty fee more frequently, such as weekly, with 30 days' prior written notice to the franchisee.
Non-payment of royalty fees constitutes a default under the Franchise Agreement and can lead to termination of the agreement. This underscores the importance of maintaining consistent sales and managing finances effectively to meet royalty obligations. Franchisees should ensure they understand how Adjusted Gross Sales are calculated and the potential impact of sales fluctuations on their ability to pay royalties.
Upon termination of the Franchise Agreement, franchisees are obligated to pay all outstanding monies, including any unpaid royalty fees, to Craters & Freighters within ten days of the termination date. This requirement highlights the financial responsibilities that extend even beyond the operational period of the franchise. Franchisees should maintain accurate records of all sales and royalty payments to avoid disputes and ensure compliance with the agreement.