What happens if a Mrcool franchisee fails to pay the Royalty Fee or Advertising Contribution?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor has sole discretion to apply any payments received from Franchisee or to offset any indebtedness of Franchisee to Franchisor to any past due indebtedness of Franchisee for Royalty Fees, Advertising Contributions, purchases from Franchisor or its affiliates, interest or any other indebtedness of Franchisee to Franchisor or its affiliates.
Franchisee agrees that under no circumstance is Franchisee entitled to withhold payments due to Franchisor under this Agreement. Among other things and without limitation to the foregoing, Franchisee expressly agrees that any claim by Franchisee as to the alleged non-performance of Franchisor's obligations shall not permit and/or entitle Franchisee to withhold payments due Franchisor under this Agreement.
Franchisee shall not, on grounds of the alleged nonperformance, material breach, or default by Franchisor of this Agreement, any other agreement between Franchisor and Franchisee, or for any other reason, withhold any payment, fee, or any other amount payable by Franchisee to Franchisor pursuant to this Agreement, including, without limitation, the payment of the Royalty Fee and Advertising Contributions, or any other payment obligation by Franchisee to Franchisor.
Without limitation as to any other Article or provision of this Agreement, upon expiration or termination of this Agreement for any reason, Franchisee shall immediately pay to Franchisor all sums and fees due from Franchisee to Franchisor under the terms of this Agreement including, but not limited to Royalty Fees and Advertising Contributions and all other sums and fees due from Franchisee to Franchisor and/or Franchisor affiliates and/or suppliers for products and services including, but not limited to, System Supplies.
If Franchisor does not pursue termination of this Agreement in the event of a default or breach by Franchise, and/or Franchisor accepts any royalties, payments, contributions, funds, or other monetary sums from Franchisee, such actions do not constitute a waiver or acceptance of Franchisee's default or breach, and Franchisor reserves the right to pursue any and all additional remedies set forth in this Agreement, at law, or in equity.
(ii) modify payment terms for approved products, supplies, or other merchandise purchased by Franchisee which may include, without limitation, requiring cash on delivery; (iii) disqualify Franchisee from being eligible for, or from participating in, special promotion programs, rebates, and/or rebate sharing that may be offered or made available to other System franchisees; and/or (iv) refrain from providing or making available to Franchisee promotional materials or other materials developed by the Brand Development Fund and/or Advertising Cooperative.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to Mrcool's 2025 Franchise Disclosure Document, Mrcool franchisees are not entitled to withhold payments due to Mrcool under any circumstances. This includes claims of non-performance by Mrcool. Specifically, franchisees cannot withhold Royalty Fees or Advertising Contributions, even if they believe Mrcool is not fulfilling its obligations.
Mrcool has sole discretion to apply any payments received from the franchisee to any past due indebtedness, including Royalty Fees, Advertising Contributions, or any other debts owed to Mrcool or its affiliates. This means Mrcool can direct payments to cover outstanding balances in whatever order they deem appropriate.
Furthermore, the Mrcool franchise agreement states that upon termination or expiration of the agreement, the franchisee must immediately pay all outstanding sums and fees, including Royalty Fees and Advertising Contributions. Mrcool also has the option to terminate the agreement if the franchisee abandons their obligations. Mrcool's failure to terminate the agreement or acceptance of payments does not waive their right to pursue additional remedies for the franchisee's default or breach. Mrcool may also modify payment terms, disqualify the franchisee from special programs, and withhold promotional materials.