How is the Point of Closing Royalty Payment for Epcon Communities calculated for each Unit?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
fund of Minimum Monthly Royalty payments.
Note 2: Point of Closing Royalty Payments: A Point of Closing Royalty Payment is due each time you close on the sale of a Unit in your project. The amount of the payment is determined by multiplying the Applicable Percentage in the table below by the gross sales price of the Unit closed, including the sales price of both real property and personal property, as provided in the Settlement Statement or the Settlement Disclosure Form for the sale of the Unit (the "Point of Closing Royalty Payment") for each Unit. However, in no event will the Point of Closing Royalty Payment be less than $3,000 per Unit, including the Point of Closing Royalty Payment applicable under the Volume-Based Reduction and Cap on Calculation of Point of Closing Royalty Payments described below. As indicated in the table below, the Applicable Percentage used to determine the Point of Closing Royalty payment varies depending upon the number of Units for which a sale is closed in a calendar year. If you violate the terms of your Franchise Agreement relating to transfer of your franchise or ownership interest of your business entity, we have the right to increase the percentage used to calculate your Point of Closing Royalty Payments to 3.5%.
Point of Closing Royalty Percentage Table Units Closed Applicable Percentage 1 - 6 2.0% 7 - 12 1.75% 13 - 24 1.50% 25 – 50 1.25% 51 and more 1% If you have more than one active project, when determining the number of Units closed in a calendar year, we will aggregate the number of Units closed in each of those projects if the project in which the Unit closed is governed by a franchise agreement with a Point of Closing Royalty Payment, and the franchisees under each applicable franchise agreement are identical or substantially similar, which will be determined in our sole and absolute discretion.
If you pay us the Point of Closing Royalty Payment for a Unit, we will, at your request and expense, sign a partial mortgage release and/or partial security interest release for that Unit.
Volume-Based Reduction to Point of Closing Royalty Payments: At the beginning of each calendar year, we may rank all of our franchisees on the basis of the total amount of Point of Closing Royalty Payments paid to us by franchisees over the course of the previous three calendar years. The top 15% of franchisees in that ranking may receive for that calendar year a reduction in the Point of Closing Royalty Percentage, provided that in the three (3) previous calendar years (i) they have closed on at least 100 Units during that three-year period, and (ii) they have paid more than $500,000 in total Point of Closing Royalty Payments to us during that three year period from all of their projects ("Qualifying Franchisees").
Qualifying Franchisees that closed from 50 Units through 99 Units in the previous calendar year will pay Point of Closing Royalty Payments on the first 12 Units closed in the current calendar year using 1.50% as the Applicable Percentage.
Qualifying Franchisees that closed 100 or more Units in the previous calendar year will pay Point of Closing Royalty Payments on the first 24 Units closed in the current calendar year using 1.25% as the Applicable Percentage.
Cap on Calculation of Point of Closing Royalty Payments: You set the prices at which your Units are sold. However, solely when determining the maximum amount of Point of Closing Royalty Payments you are required to pay to us, we may, from time to time, cap the amount of the Gross Sales Price of any Unit sold by you. This means that if you sell a Unit for a Gross Sales Price in excess of the cap that we established, your Point of Closing Royalty Payment will be based on the capped amount and not the higher Gross Sales Price for which you sold the Unit. (The Gross Sales Price of a Unit is the sales price set out in the Settlement Statement or the sale price of the property and the sale price of any personal property included in the sale, which is set out on the Closing Settlement Disclosure Form.) We will notify you if we choose to cap the amount of the Gross Sales Price, and upon this noti
Source: Item 6 — OTHER FEES (FDD pages 16–22)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, a Point of Closing Royalty Payment is required each time a franchisee closes on the sale of a unit. The payment is calculated by multiplying the 'Applicable Percentage' by the gross sales price of the unit, which includes both real and personal property as stated on the Settlement Statement or Settlement Disclosure Form. The FDD specifies that the Point of Closing Royalty Payment will not be less than $3,000 per unit, even when considering volume-based reductions or caps on calculation.
The 'Applicable Percentage' varies based on the number of units for which a sale is closed within a calendar year. For instance, if a franchisee closes on 1 to 6 units, the applicable percentage is 2.0%. This percentage decreases as the number of closed units increases, down to 1% for 51 or more units closed in a year. If a franchisee has multiple active projects, the number of units closed across these projects may be aggregated to determine the applicable percentage, provided the franchise agreements and franchisees are substantially similar, as determined by Epcon Communities.
Epcon Communities may also offer a volume-based reduction to the Point of Closing Royalty Payments for top-performing franchisees. To qualify, franchisees must be in the top 15% based on total Point of Closing Royalty Payments paid over the previous three calendar years, have closed on at least 100 units during that period, and have paid more than $500,000 in total Point of Closing Royalty Payments. Qualifying franchisees may then receive a reduced Applicable Percentage on a certain number of units closed in the current calendar year.
Epcon Communities also retains the right to cap the gross sales price used to calculate the Point of Closing Royalty Payment. If a unit is sold for a price exceeding this cap, the royalty payment will be based on the capped amount, not the actual sales price. Epcon Communities will notify franchisees if they choose to implement such a cap, which will take effect immediately upon notice. Furthermore, if a franchisee violates the terms of their Franchise Agreement regarding franchise transfer or ownership interest, Epcon Communities has the right to increase the percentage used to calculate the Point of Closing Royalty Payments to 3.5%.