How does Engel & Volkers calculate the ongoing royalty fee based on Gross Revenues?

(hereinafter called "Initial Franchise Fee"). Should during the Term of this Agreement Franchisor grant Franchisee the right to open and operate an

additional physical location(s) within Franchisee's existing Protected Area as set forth in Section 2.3 and Appendix 1, Franchisee will pay Franchisor an additional non-refundable Initial Franchise Fee of $5,000 by cashier's check or bank certified check, or by such other means as required by Franchisor for each such additional physical location at the time of Franchisor grants Franchisee the right to open and operate such location.

• 14.2 Ongoing Royalties: Franchisee will pay the following ongoing royalties to Franchisor throughout the Term in return for use of the ENGEL & VÖLKERS System and the rights acquired under this Agreement:
  • 14.2.1 For each full or partial calendar year during the Term, subject to the Minimum Annual Royalty (as defined below) and subject to the provisions set forth in Section 14.2, Franchisee will pay Franchisor an ongoing royalty on its Gross Revenues (as defined in Section 14.2.2) at the percentage rate set forth in the schedule below (the "Royalty Schedule"). Within each tier of the Royalty Schedule, the amount of Gross Revenues achieved by Franchisee is multiplied by the royalty rate of that tier to calculate the Royalty rate for that Gross Revenue reported by Franchisee.

The Royalty rate reflected for each tier in the Royalty Schedule applies only to the increment of Franchisee's Gross Revenue listed for such tier. Achieving sufficient Gross Revenue for some Gross Revenue to qualify into a higher tier in the Royalty Schedule will not reduce Royalties owed and payable by Franchisee to Franchisor on Gross Revenue in a lower Gross Revenue tier.

Royalty Schedule

If the sum of all Royalties for a calendar year during the Term is below $60,000 ("Minimum Annual Royalty"), upon notice from Franchisor, Franchisee will be required to pay to Franchisor the difference between the Royalty actually paid by Franchisee on Gross Revenues for such calendar year and $60,000, provided, however, further, that should the Payment Start Date (as defined hereinafter) not fall on January 1 of a calendar year or should this Agreement terminate or expire on a date other than December 31 of a calendar year during the Term, the Minimum Annual Royalty will be determined pro rata temporis the number of full calendar months in that calendar year from the Payment Start Date through the end of the calendar year, or until this Agreement expires or is terminated, as the case may be.

Franchisee will pay to Franchisor such amount within ten (10) days after receipt by Franchisee of such invoice provided by Franchisor.

On January 1 of each calendar year throughout the Term of the Agreement, calculation of Franchisee's Gross Revenues will start anew from $0, the Royalty rate will be reset to six percent (6%) on all Gross Revenues, and the respective tiers pursuant to the Royalty Schedule will have to be met by Franchisee's Gross Revenues to reduce Franchisee's Royalties for that calendar year.

Royalties will be paid pursuant to Section 14.6. Franchisee will pay Franchisor Royalties for all closings occurring on or after the earlier of (i) Franchisee's use of the Engel & Völkers System or Trademarks or (ii) the Opening Date as set forth in Section 14.4 (the "Payment Start Date") including within six (6) months after termination, expiration, or transfer of the Agreement if the properties so closed were "under contract for purchase" (as defined below) at the time of termination, expiration or transfer of the Agreement. If the transfer is of ownership interest in Franchisee, the obligation to pay Royalty after the transfer shall be on the transferor(s), and Royalties shall be calculated on any income the transferor(s) earn(s) directly or indirectly from each listing that before the transfer were listings of Franchisee. Notwithstanding the foregoing, no Royalty will be due: (i) on closings that occurred before the Payment Start Date;

Source: Item 22 — CONTRACTS (FDD page 88)