What is the relationship between Section 5.2(d)(ii) and the Point of Closing Royalty Payment for Epcon Communities?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
--------------------------------------------------------------------|------------------------------------------------------------------|--|--| | Unit Closings in any of Franchisee's Projects in a Calendar Year | Percentage Applicable to Unit Closings for that Calendar Year | | | | 1-6 | 2.00 | | | | 7-12 | 1.75 | | | | 13-24 | 1.50 | | | | 25-50 | 1.25 | | | | 51 and more | 1.00 | | |
- (ii) Volume–Based Reduction to Point of Closing Royalty Payments: At the beginning of each calendar year, Franchisor may, in its sole discretion, rank all franchisees on the basis of the total amount of Point of Closing Royalty Payments paid Franchisor over the course of the previous three calendar years. The top Fifteen percent (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, collectively, (i) they have closed at least 100 Units and (ii) they have paid more than $500,000 in total Point of Closing Royalty Payments to Franchisor from all of the franchisee's Projects ("Qualifying Franchisees").
- (a) Qualifying Franchisees that closed from 50 Units through 99 Units in the previous calendar year will p
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to the 2025 FDD, Section 5.2(d)(ii) of the Epcon Communities Franchise Agreement describes a volume-based reduction to the Point of Closing Royalty Payments. At the beginning of each calendar year, Epcon Communities may rank all franchisees based on the total amount of Point of Closing Royalty Payments paid over the previous three calendar years. The top 15% of franchisees in this ranking may receive a reduction in their Point of Closing Royalty Percentage for that calendar year.
To qualify for this reduction, franchisees must have collectively closed at least 100 units and paid more than $500,000 in total Point of Closing Royalty Payments from all of their projects in the previous three calendar years. Franchisees meeting these criteria are considered "Qualifying Franchisees." The specific reduction in the Point of Closing Royalty Percentage depends on the number of units closed in the previous calendar year.
Qualifying Franchisees who closed between 50 and 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 who 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. This provides an incentive for high-performing franchisees to expand their operations and increase their sales volume, as it directly translates to lower royalty payments on a portion of their unit closings.