What index is used to adjust the minimum royalty fee for a Fitstop franchise annually?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
to open the Franchised Business under this Agreement, you must pay us an ongoing royalty fee (the "Royalty Fee") amounting to the greater of: (i)
7% of the Gross Revenue generated by the Franchised Business; and (ii) $1,500/month (the "Minimum Royalty"). The Parties agree and acknowledge as follows: (i) the Royalty Fee may be deducted from the Gross Revenue of the Franchised Business by our Approved Supplier for billing/collection services; and (ii) the Minimum Royalty shall be (a) waived over the first six (6) full or partial calendar months the Franchised Business is open and operating provided you timely open the Franchised Business under this Agreement, and (b) subject to annual adjustment consistent with the Consumer Price Index ("CPI") and inflation. In the event the Franchised Business i
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, the minimum royalty fee is subject to annual adjustments based on the Consumer Price Index (CPI) and inflation. The franchisee must pay a royalty fee, which is the greater of 7% of the Gross Revenue generated by the Franchised Business or $1,500 per month (the "Minimum Royalty").
This minimum royalty fee is initially waived for the first six full or partial calendar months that the Fitstop franchise is open and operating, provided the franchisee opens the business on time according to the agreement. However, if the opening is delayed, the minimum royalty fee commences in the first month the business was required to open.
The adjustment of the minimum royalty fee based on the CPI and inflation means that as the cost of goods and services increases, the minimum amount a franchisee must pay to Fitstop as a royalty also increases. This protects Fitstop from inflation and ensures that the royalty fee keeps pace with economic changes. For a prospective franchisee, this means that the fixed component of their royalty payments could increase over time, impacting their operating costs and profitability.