Thoughts on Fees in Franchise Agreements
Legal Article GuideBy: Lance Winslow
Franchising companies often make a large percentage of their revenue from fees. There are many types of fees that franchisors charge, the most common of course being royalty fees. Now then, let me digress and speak of two other types of fees; one, transfer fees and two, late payment fees. You see, when a franchisee sells their rights to a new franchisee this creates paperwork, training obligations and general stress in the franchise organization as the new franchisee gets situated. And anytime a franchisee fails to pay any other fees owed to franchisor this causes problems in cash flow.
It is for this reason that I decided to add these two clauses into our franchise agreements, as listed below;
2.4 Transfer Fee
Upon any transfer or assignment of this Agreement, Franchisee will pay to Franchisor a transfer fee in an amount equal to (i) US $5,000 if transferred to an existing Car Wash Guys System Franchisee, or (ii) US $10,000, if the franchise is transferred to a new Car Wash Guys System Franchisee.
2.5 Late Payment
Franchisee agrees that any payment to Franchisor that is not received within fifteen (15) calendar days after its due date will bear interest at the lower of one and one-half percent (1 1/2%) per month and the maximum rate permitted under applicable law in the Marketing Area, from the date payment was due to the date payment is received by Franchisor.
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A franchisor must pay attention to their costs and their cash flows. It is always wise to discuss these things with a franchisor attorney who understands the situations, to protect the franchising company’s rights and financial stability. I hope you will consider this in 2006.
Lance Winslow - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs/
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