Franchisor Royalty Collection, Late Pays and Interest Charges
If you are a franchisor you will soon find how incredibly dishonest some humans are, as they attempt to hide, conceal or not pay their royalties as agreed. Honest men with integrity are so hard to find in this; gimme world. Indeed the most important part of any franchise system, especially a rocket ship fast moving entrepreneurial type franchise company is to stay up on cash flow, as there is never enough to do all you want to do. And you cannot stop growing once the rocket ship takes off.
Like all franchisors our company was challenged by collecting royalties and getting paid on time, so I decided to implement late payment charges on past due accounts in order to collect what was owed so we would have the cash flow without depleting all of our initial capital. Below is the plan I instituted and the clause I wrote for our franchise agreement, perhaps this might help enlighten you as to the challenges you will face and give your reason to consider your solution to your own issues, whatever they might be in this regard;
7.22 Late Charges On Past Due Amounts
A late charge will be added to any sum Franchisee is to pay to Franchisor under this Agreement that is not received within fifteen (15) calendar days after its due date. The late charge 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.
Franchisor’s acceptance of late charges will not constitute a waiver of the breach created by Franchisee’s non-payment of any amount when due. Notwithstanding the payment of any late charges, Franchisor may exercise any rights or remedies granted by this Franchise Agreement upon Franchisee’s breach or any rights or remedies otherwise granted by law.
Nothing contained in this Franchise Agreement obligates Franchisor to accept any payments after due or to commit to extend credit to or otherwise finance Franchisee’s operation of the Franchise. Franchisee acknowledge that failure to pay all amounts when due will constitute grounds for termination of this Agreement.
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All franchisors, especially when just starting out must never forget that cash is king and that you must make sure to stay up on royalty collection, as many will attempt to use all your proprietary information and try to never pay you a dime. If you allow this, then others will follow suit and then if you wait to get tough you will end up litigating and paying all the money you collect to lawyers. So, pay attention to this in 2006.
"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/wttbbs/
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