Franchise Royalty Fee Clause Samples
The Franchise Royalty Fee clause defines the ongoing payment that a franchisee must make to the franchisor, typically as a percentage of gross sales or a fixed periodic amount. This fee is usually paid on a regular basis, such as monthly or quarterly, and is calculated based on the franchisee’s revenue generated from operating the franchised business. The clause ensures that the franchisor receives compensation for the continued use of its brand, systems, and support, thereby aligning the interests of both parties and providing a clear financial obligation for the franchisee.
Franchise Royalty Fee. Notwithstanding anything to the contrary in this Agreement or the Franchise Agreement, during the first sixty (60) months after the Full Conversion Date, Franchisor, by execution hereof, agrees that the Royalty Fee (as defined in the Franchise Agreement) otherwise payable by Owner for any Fiscal Year shall be reduced, up to the full amount of any such Royalty Fee as calculated under the Franchise Agreement, in the event of any Deficiency for such Fiscal Year, to the extent of the Deficiency remaining after reduction of the Basic Fee in accordance with Section 5.1(b). The obligation of Franchisor to reduce or eliminate its Royalty Fee in any Fiscal Year is limited to the full amount of the Deficiency for such Fiscal Year only, and the Royalty Fee for any Fiscal Year shall not be reduced as a result of any Deficiency in any prior or subsequent Fiscal Year. Owner hereby agrees that, for any Fiscal Year, the combined obligation of Franchisor and Select to reduce their respective fees as set forth in this Section 2.7 and Section 5.1 shall not exceed the amount of Deficiency for such Fiscal Year. In each Fiscal Year during which both the Royalty Fee and the Basic Fee are reduced due to a Deficiency, the Basic Fee shall be reduced in full before the Royalty Fee is reduced to cover any remaining amount of the Deficiency. To the extent Franchisor has received any such Royalty Fees it will remit such fees to Owner as determined herein. See example set forth on Exhibit E hereto for a demonstration of this calculation.