What is the definition of the Payment Start Date for an Engel & Volkers franchisee?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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; and (ii) on closings of any properties that were "under contract for purchase" before the Payment Start Date (jointly "Exempted Transactions"), provided, that Franchisee provides Franchisor documentation of any Exempted Transactions no later than two (2) business days before the Payment Start Date. For the avoidance of doubt, as used in this Section 14 "under contract for purchase" means that there is a fully executed sale or escrow agreement for the property. Should Franchisee fail to provide or fail to provide in a timely fashion to Franchisor documentation for the Exempted Transactions, Franchisee will pay Franchisor Royalties on any Gross Revenues received from any such transactions.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, the Payment Start Date is defined as the earlier of two occurrences: the franchisee's use of the Engel & Völkers System or Trademarks, or the Opening Date. This date is significant because it marks when the franchisee must begin paying royalties to Engel & Volkers for all closings.
The Payment Start Date also has implications for transactions that occur after the termination, expiration, or transfer of the franchise agreement. Royalties are still due on closings within six months of such events if the properties were "under contract for purchase" at the time of termination, expiration, or transfer. The term "under contract for purchase" is specifically defined as a fully executed sale or escrow agreement for the property.
Engel & Volkers requires franchisees to provide documentation of any transactions that are exempted from royalties (i.e., closings that occurred before the Payment Start Date or closings of properties that were "under contract for purchase" before the Payment Start Date) no later than two business days before the Payment Start Date. Failure to provide this documentation in a timely manner will result in the franchisee owing royalties on the gross revenues received from those transactions. This requirement underscores the importance of franchisees maintaining accurate records and adhering to reporting deadlines to avoid unnecessary royalty payments.