How is the Membership Fee Payment amount calculated for a Red Wagon Club franchise?

According to Red Wagon Club's 2024 Franchise Disclosure Document, the Membership Fee Payment is calculated based on membership fees collected. Specifically, the franchisee receives a Membership Fee Payment equal to one-third (1/3) of the membership fees paid by members of their Red Wagon Club business under Membership Agreements during the preceding month. This payment is remitted to the franchisee on or before the 10th day of each calendar month.

Currently, Red Wagon Club's affiliate, OpCo, enters into Membership Agreements with the members and collects the membership fees. OpCo then remits one-third of these dues to the franchisee monthly. However, Red Wagon Club retains the option to change this arrangement. They may elect to have the franchisee enter into Membership Agreements directly with clients, in which case the franchisee would collect the membership fees and remit two-thirds (2/3) of the fees to Red Wagon Club each month.

This arrangement means the franchisee's revenue from membership fees is directly tied to their ability to attract and retain members. The shift in responsibility for managing membership agreements could impact the franchisee's administrative workload and cash flow. Prospective franchisees should clarify with Red Wagon Club which model is currently in use and what factors might trigger a change in the future.