What is the minimum annual royalty that an Engel & Volkers franchisee must pay?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
t (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.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
Based on the 2025 Engel & Volkers Franchise Disclosure Document, franchisees are obligated to pay ongoing royalties throughout the term of their agreement. These royalties are subject to a Minimum Annual Royalty, though the specific amount for this minimum is not detailed in the provided excerpts. The ongoing royalty is calculated on Gross Revenues, with the percentage rate determined by a Royalty Schedule. The schedule operates in tiers, where the royalty rate applies only to the increment of Gross Revenue within each tier.
It's important to note that achieving Gross Revenues that qualify for a higher tier in the Royalty Schedule does not reduce the royalties owed on Gross Revenue in lower tiers. Failure to report all Gross Revenues or pay fees when due results in a higher royalty rate of six percent (6%) on all Gross Revenues. This higher rate applies for the remainder of the agreement's term if the franchisee does not correct the underreporting or underpayment.
To fully understand the financial obligations, a prospective Engel & Volkers franchisee should seek clarification from the franchisor regarding the specific Minimum Annual Royalty amount. Understanding the tiered Royalty Schedule and potential penalties for non-compliance is also crucial for financial planning and operational management.