What sales are excluded from the definition of 'Gross Revenue' when calculating the Crawlspace Medic royalty fee?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
- 3.2 Reservation of Rights. Franchisee understands and agrees that all rights to any businesses, other than as specified in this Agreement, are fully reserved to Franchisor within or outside of the Territory. By way of example only, Franchisor reserves the rights to offer (i) other products or services not offered under the Marks, (ii) other crawlspace or basement care and repair concepts under the Marks or other trademarks, including licensing Franchisor's designs for use in other formats and (iii) products or services through any channel in the Territory other than a dedicated Crawlspace Medic location, such as the Internet ("Alternate Distribution Channels"). Franchisee will receive no compensation for Franchisor's sales through Alternate Distribution Channels made within the Territory. Franchisor also reserves the right to acquire, be acquired by or merge with another company. Franchisee agrees that such implementation of Franchisor's rights pursuant to this Section 3.2 is deemed not to impair or injure Franchisee's rights pursuant to Section 2 hereof.
- 3.3 Minimum Performance Requirements. In order to maintain the Territory, franchisee understands and agrees that they must maintain the following Minimum Performance Requirements for Revenue Per Year of Agreement:
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to Crawlspace Medic's 2024 Franchise Disclosure Document, franchisees do not owe royalties on sales made by the Franchisor through "Alternate Distribution Channels" within the franchisee's territory. These alternate distribution channels include online sales. This means that if Crawlspace Medic itself sells products or services directly to customers in a franchisee's territory through the internet or other channels, the franchisee does not have to pay a royalty on those sales.
This reservation of rights allows Crawlspace Medic to explore different sales avenues without impacting a franchisee's royalty obligations. It also clarifies that the franchisee's primary responsibility is to operate a physical Crawlspace Medic location and serve customers within their designated territory through that location. The franchisee is specifically prohibited from selling and soliciting customers through these alternative distribution channels.
This policy could be beneficial for franchisees as it prevents them from paying royalties on sales they did not directly generate. However, it also means that Crawlspace Medic retains control over certain sales channels within the territory, which could potentially impact a franchisee's overall revenue. A prospective franchisee should consider the potential impact of these alternate distribution channels on their business when evaluating the Crawlspace Medic franchise opportunity.