What is the dependency between the Payment Start Date and the calculation of the Minimum Annual Royalty for Engel & Volkers?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
sor on Gross Revenue in a lower Gross Revenue tier.
Royalty Schedule
| Tier | Annual Gross Revenues (reported and paid on a calendar year basis) | Royalty Rate | |
|---|---|---|---|
| From | To | ||
| 1 | $0 | $1,000,000 | 6.00% |
| 2 | $1,000,000.01 | $2,000,000 | 5.50% |
| 3 | $2,000,000.01 | $5,000,000 | 5.00% |
| 4 | $5,000,000.01 | $10,000,000 | 4.50% |
| 5 | $10,000,000.01 | $20,000,000 | 4.25% |
| 6 | $20,000,000.01 | $30,000,000 | 4.00% |
| 7 | $30,000,000.01 | and above | 3.75% |
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 shoul
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 directly impacts the calculation of the Minimum Annual Royalty. The Minimum Annual Royalty is typically $60,000 per calendar year. However, if the Payment Start Date does not fall on January 1st, or if the franchise agreement terminates before December 31st, the Minimum Annual Royalty is prorated. This proration is based on the number of full calendar months from the Payment Start Date to the end of the year or until the agreement's termination date.
In practical terms, this means that an Engel & Volkers franchisee who begins operations mid-year will not be held to the full $60,000 Minimum Annual Royalty for that initial year. Instead, their minimum royalty obligation will be reduced to reflect the portion of the year they were actually operating. For example, if a franchisee's Payment Start Date is July 1st, their Minimum Annual Royalty for that year would be approximately $30,000 (half of $60,000), since they are only operating for six months of the year.
This pro-rata calculation provides some financial relief for new Engel & Volkers franchisees during their initial period of operation, allowing them time to build their business without the immediate pressure of meeting the full Minimum Annual Royalty. It also ensures fairness in situations where the franchise agreement ends before the conclusion of a full calendar year. Franchisees should carefully note their Payment Start Date and understand how it affects their royalty obligations, especially in the first and last years of their franchise term.
Engel & Volkers requires the franchisee to pay the difference between the royalty actually paid and the prorated minimum annual royalty within ten days of receiving an invoice from them. Franchisees should ensure they have sufficient funds to cover this potential payment.