What constitutes an 'inadvertent error' when understating royalty fees for a Goldfish Swim School?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
in Exhibit 4 to this Agreement. The Franchise Fee shall be deemed fully earned upon execution of this Agreement and is nonrefundable, except under certain conditions set forth under Sections 5.2 and 8.3. The Franchise Fee is payment, in part, for expenses incurred by Franchisor in furnishing assistance and services to Franchisee as set forth in this Agreement and for costs incurred by Franchisor, including general sales and marketing expenses, training, legal, accounting and other professional fees.
3.2 Monthly Royalty Fee
Franchisor will collect a Royalty Fee on a monthly basis commencing on the earlier of the date that Franchisee opens for business to the public under section 5.6.1 of this Agreement or on the expiration of the Development Period as defined herein. Thereafter, on the fifth day of each month (unless such fifth day is a Saturday or Sunday, and in such case on the following Monday), for so long as this Agreement shall be in effect, Franchisee shall pay to Franchisor without offset, credit or deduction of any nature, a monthly fee ("Royalty Fee"). The Royalty Fee shall be equal to the greater of One Thousand Two Hundred Fifty Dollars ($1,250) or six percent (6%) of Gross Sales for the preceding month for the ninety (90) day period following the earlier of the date Franch
Source: Item 23 — RECEIPTS (FDD pages 77–389)
What This Means (2025 FDD)
I am unable to provide information on what constitutes an 'inadvertent error' when understating royalty fees for a Goldfish Swim School, according to the 2025 Franchise Disclosure Document excerpts provided. While the excerpts define the Royalty Fee as the greater of $1,250 or 6% of Gross Sales for the first 90 days and the greater of $4,000 or 6% of Gross Sales thereafter, they do not specify what would be considered an inadvertent error in understating these fees.
Item 3.2 specifies the amounts and percentages related to the monthly royalty fee, as well as the payment schedule and method. It also mentions the requirement for franchisees to submit Gross Sales Reports monthly, which are used to calculate the royalty fee. However, the document does not elaborate on the circumstances under which an error in royalty fee calculation would be classified as inadvertent, nor does it detail the repercussions of such errors.
A prospective Goldfish Swim School franchisee should seek clarification from the franchisor regarding the definition of 'inadvertent error' in the context of royalty fee payments. Understanding the specific criteria and potential consequences is crucial for maintaining compliance and avoiding disputes with the franchisor. It would also be beneficial to inquire about the procedures for correcting errors and any potential penalties associated with underreporting gross sales or underpaying royalty fees.