When does the calculation of an Engel & Volkers franchisee's Gross Revenues start anew each year?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the calculation of a franchisee's Gross Revenues resets to $0 on January 1st of each calendar year. This reset affects both the ongoing royalty calculation and the National Marketing and Technology Fund Fee (NMTFF) rate.
This means that each year, an Engel & Volkers franchisee starts fresh in terms of accumulating Gross Revenues for royalty and NMTFF calculations. The franchisee must again meet the thresholds in the Royalty Schedule and NMTFF Schedule to potentially qualify for lower royalty and NMTFF rates as their Gross Revenues increase throughout the year.
The reset to $0 on January 1st impacts the franchisee's financial planning and performance tracking. Franchisees need to be aware that their royalty and NMTFF rates will fluctuate throughout the year based on their accumulated Gross Revenues, and they should factor this into their financial projections and business strategies. This annual reset is a common practice in franchising, allowing for a standardized evaluation period for all franchisees within the Engel & Volkers system.