How are royalty fees calculated for sales in an adjacent territory for a Craters & Freighters franchise?
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.
Franchisee acknowledges and agrees that neither the ability to service nor the grant of Franchisor's permission to service customers residing or operating in any Adjacent Territory affords Franchisee any right, title, or interest in or to such Adjacent Territory whatsoever, including the ability to do further business in the Adjacent Territory after it is granted to a third party (including any right to acquire such Adjacent Territory or any right of first refusal as to such Adjacent Territory).
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, franchisees are obligated to pay royalty fees on Adjusted Gross Sales from customers residing or operating within both their designated territory and any adjacent territory they are authorized to serve. Adjusted Gross Sales includes all amounts received from customers for services and products, whether paid by cash, credit, checks, or other means, but excludes sales or services taxes collected and remitted to the appropriate authorities.
This means that if a Craters & Freighters franchisee is granted the right to operate in an adjacent territory, they must remit royalty fees to Craters & Freighters on the revenue generated from that adjacent territory. The royalty fee applies as long as the franchisee has permission to service the adjacent territory.
This policy ensures that Craters & Freighters receives compensation for all sales made by a franchisee, regardless of whether the sales originate within the franchisee's primary territory or an adjacent one. It also incentivizes franchisees to maximize sales efforts in both their territory and any adjacent territories they are authorized to serve, as all revenue generated is subject to royalty fees.