What happens if a tax is imposed on the Royalty Fee that Deer Solution cannot offset?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 2: Royalty Fees – You must pay to us a continuing royalty fee (the "Royalty Fee"). The Royalty Fee is a continuing weekly fee equal to 8% (the "Royalty Rate") of your weekly Gross Sales. In the event we receive Gross Sales directly from the customer of your Deer Solution Business, we may charge the Royalty Fee instantly. If any federal, state, or local tax other than an income tax is imposed on the Royalty Fee which we cannot directly, and dollar for dollar, offset against taxes required to be paid under any applicable federal or state laws, you must compensate us in the manner prescribed by us so that the net amount or net effective Royalty Fees received by us is not less than 8% of your Gross Sales.
Source: Item 6 — OTHER FEES (FDD pages 14–19)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, franchisees may be responsible for compensating Deer Solution if a tax is imposed on the Royalty Fee that Deer Solution cannot offset. The standard Royalty Fee is 8% of weekly Gross Sales. If a federal, state, or local tax (excluding income tax) is levied on this Royalty Fee, and Deer Solution cannot directly offset this tax against other taxes they are required to pay under applicable laws, the franchisee must compensate Deer Solution.
This compensation ensures that Deer Solution receives a net effective Royalty Fee that is not less than 8% of the franchisee's Gross Sales, meaning the franchisee will have to pay an additional amount to cover the tax. The method of compensation will be determined by Deer Solution.
For a prospective Deer Solution franchisee, this means that the actual cost of the Royalty Fee could fluctuate depending on changes in tax laws. It is important to understand what taxes could potentially apply to the Royalty Fee in your specific location and how Deer Solution plans to manage such situations. This clause protects Deer Solution's revenue but places the burden of unforeseen tax increases on the franchisee, potentially impacting profitability.