When does the Engel & Volkers franchisee's obligation to pay royalties begin?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
dar 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; 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.
Notwithstanding the decreasing Royalty rate set forth in the Royalty Schedule above, if Franchisee does not report all Gross Revenues pursuant to Section 13.1 or pay all fees on it when due as set forth in this Agreement, the Royalty rate on all of Franchisee's Gross Revenues will be six percent (6%).
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, the franchisee's obligation to pay royalties begins on the Payment Start Date. The Payment Start Date is defined as the earlier of (i) the franchisee's use of the Engel & Völkers System or Trademarks or (ii) the Opening Date. Royalties are paid for all closings occurring on or after this Payment Start Date. This obligation extends to closings within six months after termination, expiration, or transfer of the Agreement if the properties were under contract for purchase at the time of termination, expiration, or transfer.
However, there are exceptions. No royalty is due on closings that occurred before the Payment Start Date or on closings of properties that were under contract for purchase before the Payment Start Date. To claim these exemptions, the franchisee must provide Engel & Volkers with documentation of any Exempted Transactions no later than two business days before the Payment Start Date. Failure to provide this documentation in a timely fashion will result in the franchisee paying royalties on any gross revenues received from such transactions.
If the Payment Start Date occurs before the Opening Date without Engel & Volkers's written consent, the franchisee must pay all ongoing fees under the Agreement from the date the franchisee begins operating the Residential Real Estate Brokerage using the Trademarks and the Engel & Völkers System. This highlights the importance of adhering to the agreed-upon timeline and obtaining necessary approvals to avoid additional financial obligations. Furthermore, failure to report all Gross Revenues or pay all fees when due will result in a Royalty rate on all of Franchisee's Gross Revenues of six percent (6%).