How is the Interim Franchise Royalty Fee calculated for a Punch King Fitness franchise?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
ure_0.jpeg)
| Name of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Transfer Fee | $2,500 | Upon Franchisee's request for consent to the proposed transfer of franchise or Area Development Agreement | A transfer includes any sale, assignment, conveyance, giving away, pledging, mortgaging, or otherwise encumbering any interest in ownership in the Franchised Business, Franchise Agreement, or Area Development assets outside of the ordinary course of business or ownership rights. The Transfer Fee is non refundable |
| Renewal Franchise Fee | $2,500 | At least 9 months before the expiration of the franchise | To transfer your franchise, you must pay this fee and meet the conditions listed in the Franchise Agreement. |
| Interim Franchise Royalty Fees | Franchisor's then-current Royalty Fee plus 2% | 4th of each month when applicable | An Interim Franchise Fee applies if your Franchise Agreement expires, no renewal franchise agreement is signed, and you continue the franchise business operation. |
| Relocation Fee | Reimbursement of Franchisor's costs and expenses incurred for reviewing or approving the relocation | When applicable | If you relocate your franchise business, you must reimburse us for the cost and expenses we incur in connection with your r |
Source: Item 6 — OTHER FEES (FDD pages 10–16)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, an Interim Franchise Royalty Fee is assessed if a franchisee's agreement expires, a renewal agreement isn't signed, and the franchisee continues to operate the business. This fee is calculated as the franchisor's then-current Royalty Fee plus an additional 2%.
In practical terms, this means that if a Punch King Fitness franchisee decides to continue operating their franchise after the initial agreement term without renewing, they will be subject to a higher royalty fee than they were paying under the original agreement. The base royalty will be whatever Punch King Fitness is charging new franchisees at that time, plus an extra 2% on top of that.
For a prospective franchisee, this highlights the importance of planning for the end of the franchise term. It would be prudent to negotiate a renewal well in advance to avoid triggering these higher interim fees. Continuing to operate under an expired agreement could significantly impact profitability due to the increased royalty burden. The Interim Franchise Royalty Fees are due on the 4th of each month when applicable.