Are Eriks Delicafe franchisees allowed to make any setoff or deduction from royalty payments?
Eriks_Delicafe Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall throughout the term of this Agreement at Franchisee's expense, submit to Erik's, complete and accurate reports and payments in such form and detail as Erik's may require, and in the manner that Erik's may designate, as follows:
- (a) Unless otherwise required by Erik's, on or before Friday of each calendar week, a report of all Gross Revenue of the DeliCafe for the preceding week (as defined in Section 3.3), together with payment, without setoff or deduction, of the royalties required by Section 3.3;
Source: Item 23 — RECEIPTS (FDD pages 38–159)
What This Means (2024 FDD)
According to Eriks Delicafe's 2024 Franchise Disclosure Document, franchisees are required to submit royalty payments without any deductions or setoffs. Specifically, franchisees must submit a report of all Gross Revenue of the DeliCafe for the preceding week, along with payment of the royalties required, without any setoff or deduction. This means that franchisees cannot reduce the amount of their royalty payments to Eriks Delicafe for any reason.
This requirement ensures that Eriks Delicafe receives the full amount of royalties owed, which are calculated as five percent (5%) of Gross Revenue. The royalties are a primary source of income for Eriks Delicafe and are used to support the franchise system. By prohibiting setoffs or deductions, Eriks Delicafe maintains a consistent and predictable revenue stream.
Failure to comply with this requirement can result in penalties. If any payment is overdue, Eriks Delicafe will charge a late fee equal to ten percent (10%) of the overdue amount or $50.00, whichever is greater, for Royalty payments. Consistent failure to pay royalties can also lead to termination of the franchise agreement, as outlined in Section 5.2 of the agreement.