What is the dependency between the Floors To Go Membership Agreement and the Early Termination Fee?
Floors_To_Go Franchise · 2025 FDDAnswer from 2025 FDD Document
Showroom, depending on the size of your Showroom. FTG will cover these costs of the Redesign (i.e., non-tenant-improvement-item costs); however, if your Membership Agreement is terminated prior to completion of the initial fiveyear term, you must pay FTG an early termination fee equal to the amount associated with the Redesign of your Showroom less 20% for each full year from the effective date of your Membership Agreement that you remained a member (the "Early Termination Fee"). For example, if you became a member on March 1, 2025, and the cost of your Redesign was $30,000, and your membership was terminated on January 1, 2028, you would owe us a cash payment equal to $18,000 ($30,000 – [$30,000 X (20% x 2) = $12,000] = $18,000). The Early Termination Fee shall be due and payable to FTG in cash immediately on the date of any such early termination. You will not be required to repay any portion of the cost to Redesign your Showroom if you remain a
Source: Item 6 — OTHER FEES (FDD pages 12–14)
What This Means (2025 FDD)
According to Floors To Go's 2025 Franchise Disclosure Document, the Early Termination Fee is directly tied to the Membership Agreement. If a franchisee terminates their Membership Agreement with Floors To Go before the initial five-year term is complete, they are obligated to pay an Early Termination Fee. This fee is designed to reimburse Floors To Go for the costs associated with the Redesign of the franchisee's showroom. The amount of the fee varies between $20,000 and $50,000.
The Early Termination Fee is calculated based on the cost of the showroom redesign, with a reduction of 20% for each full year the franchisee remained a member. For instance, if the redesign cost $30,000 and the membership was terminated after two full years, the franchisee would owe $18,000. However, if the franchisee remains a Floors To Go member for the entire initial five-year term of the Membership Agreement, they will not be required to repay any portion of the redesign costs.
This arrangement means that a franchisee's commitment to the full five-year term significantly impacts their financial obligations to Floors To Go. Early termination can result in a substantial fee, while fulfilling the term eliminates this cost. This is a fairly common practice in franchising, where franchisors often invest in initial setup and want to ensure a reasonable period to recoup their investment and for the franchisee to establish the business.