What is the 'Membership Fee Payment' that Red Wagon Club remits to franchisees?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
rminate the Franchise Agreement.
- 3. Membership Fees. On or before the 10th day of each calendar month, we will remit to you an amount (the "Membership Fee Payment") equal to one-third (1/3) of membership fees paid by Members of your RWC Business under Membership Agreements during the preceding month.
ITEM 7. ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT
| Type of Expenditure1 | Amount | Method of Payment | When Due | To Whom Payment Is To be Made | |
|---|---|---|---|---|---|
| Initial Franchise Fee2 | $50,000 | On signing Franchise Agreement | Lump Sum | Us | |
| Leasehold | $5,000 to $20,000 | As Incurred | As Agreed | Outside | |
| Improvements3 | suppliers | ||||
| Signage | $3,500 to $15,000 | As Incurred | Lump Sum | Outside suppliers | |
| Furniture and | $3,500 to $20,000 | As Incurred | As Agreed | Outside | |
| Fixtures4 | suppliers | ||||
| Software and Phone | $4,500 to $7,500 | As Incurred | As Agreed | Outside | |
| System5 | suppliers | ||||
| Computers and | $1,000 to $6,000 | As Incurred | Lump Sum | Outside | |
| Equipment6 | suppliers | ||||
| Professional Fees7 | $3,000 to $10,000 | As Incurred | Lump Sum | Third parties | |
| Initial Inventory | $2,500 to $5,000 | As Incurred | Lump Sum | Outside suppliers | |
| Insurance8 | $1,250 to $5,000 | As Incurred | Lump Sum | Third parties | |
| Training Expenses9 | $5,000 to $7,000 | As Incurred | As Incurred | Third parties | |
| Type of Expenditure1 | Amount | Method of Payment | When Due | To Whom Payment Is To be Made | |
| Affiliate Law Firm | $5,000 to $20,000 | As Incurred | Lump Sum | Third parties | |
| Client Relations | |||||
| Program10 | |||||
| Additional Funds – 3 Months11 | $15,000 to $35,000 | As Incurred | As Incurred | Employees, landlord, suppliers, utilities, etc. | |
| TOTAL | $99,250 to $200,500 | #### Accompanying Footnotes: |
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- General. Amounts payable to us are non-refundable, unless otherwise indicated. Amounts payable to others (landlord, contractors, vendors, local agents, airlines, hotels, restaurants, suppliers, attorneys, accountants, and consultants etc.) may be refundable based on their policies and your agreements with them. It is anticipated that you will operate your RWC Business from the office of the Affiliate Law Firm Business. Accordingly, if the Affiliate Law Firm Business's office meets the System Standards, you may not be required to incur certain expenditures related to the following categories: leasehold improvements, furniture and fixtures, software and phone systems, computers and equipment, and/or insurance.
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- Initial Franchise Fee.
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2024 FDD)
According to Red Wagon Club's 2024 Franchise Disclosure Document, the 'Membership Fee Payment' is the amount Red Wagon Club remits to its franchisees, equivalent to one-third (1/3) of the membership fees collected from members of the franchisee's Red Wagon Club business during the preceding month. This payment is scheduled to be remitted on or before the 10th day of each calendar month.
Currently, Red Wagon Club's affiliate, OpCo, manages the Membership Agreements and collects the associated fees. OpCo then remits one-third of these membership dues to the franchisee monthly. However, Red Wagon Club retains the option to shift this responsibility to the franchisee, in which case the franchisee would directly enter into Membership Agreements with clients, collect the fees, and then remit two-thirds (2/3) of the collected membership fees to Red Wagon Club each month.
This arrangement has significant implications for franchisees. Initially, OpCo's involvement reduces the franchisee's administrative burden by handling membership agreements and fee collection. However, if Red Wagon Club decides to transfer these responsibilities to the franchisee, it would increase the franchisee's workload and require them to manage client relationships and fee collection directly. The franchisee's revenue stream is directly tied to membership fees, making the terms of the Membership Agreements and the efficiency of fee collection critical to their financial success.