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Earnings Claims of Top Franchises Revealed

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Considering a Chick-fil-A Franchise? Don’t Overlook These 17 Important Franchise Fees

by Franchise Chatter on October 31, 2016

in Chicken Franchises, Franchise Fees



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Chick-fil-A Sandwich Photo by roboppy

If you are considering a Chick-fil-A franchise, don’t get blindsided by these 17 important franchise fees (from the initial franchise fee, to the operating service fee, to 15 other fees found in Items 5 and 6 of Chick-fil-A’s 2016 FDD).

1.  Initial Franchise Fee:  $10,000

  • You must pay an initial franchise fee of $10,000 payable in full when you sign the Franchise Agreement.
  • The initial franchise fee is considered fully earned and non-refundable upon payment, except that $5,000 of the initial franchise fee is deemed to be, and is maintained by Chick-fil-A as, an initial payment of working capital for the business under the Franchise Agreement (“the working capital deposit”). You must always maintain the working capital deposit while you are a franchised Operator.
  • Upon termination or non-renewal of your Franchise Agreement, Chick-fil-A will conduct a final reconciliation and you will receive the working capital deposit funds, minus any costs, expenses, and then-known losses incurred by Chick-fil-A on account of your franchised Chick-fil-A Restaurant business.
  • This process will be conducted in a method and manner determined by Chick-fil-A under its then-current restaurant close-out procedures (currently, within two and one-half months after termination or non-renewal).
  • Prior to the opening of your franchised Chick-fil-A Restaurant business, you must also obtain the opening inventory, premises Lease, equipment lease, and insurance. These payments are estimated to range from approximately $26,025 to $154,900 but will not be due until after your franchised Chick-fil-A Restaurant business opens.

2.  Advertising:  may vary (a) between 0% and 3.25%, to be determined by Chick-fil-A, as a percentage of Gross Receipts or (b) by vote of Operators in local or regional areas

  • Since June 30, 1989, Chick-fil-A has not charged any amount for advertising (0% of Gross Receipts) as a matter of internal policy, which is subject to change.
  • Operators within a geographic area may establish local or regional advertising fees.

3.  Additional Franchise Fee:  $5,000 for each additional Chick-fil-A Restaurant business

  • Chick-fil-A may, but is not obligated to, during the term of the Franchise Agreement, offer you a license to operate one or more additional Chick-fil-A Restaurant businesses under your Franchise Agreement.
  • You must pay an additional franchise fee of $5,000 for each additional Chick-fil-A Restaurant business, payable in full when you sign the Additional Business Amendment attached as an exhibit to the Franchise Agreement.
  • The additional franchise fee is considered fully earned and non-refundable upon payment.

4.  Business Services Fee:  $300 per month

  • Chick-fil-A may offer directly or indirectly through an approved third-party supplier, certain business services. If offered, you must use the services. Chick-fil-A will determine the fee for services it provides.
  • You will pay for the cost and expense of your use of third-party business services, including costs rebilled or passed through to you by Chick-fil-A.

5.  Rent:  $1,950 to $50,000 (including, where applicable, percentage rent) per month

  • Your lease payment will be based on the Lease, and any applicable prime lease or ground lease, for your franchised Chick-fil-A Restaurant business and will vary depending on where your franchised Chick-fil-A Restaurant business is located, the size of the premises, whether you are to operate a free-standing, mall, or in-line restaurant, and other factors.
  • If Chick-fil-A owns the premises on which a free-standing Chick-fil-A Restaurant is operated, under the terms of the Lease, you will be a lessee of the premises and must comply with the obligations imposed by Chick-fil-A upon you as primary lessee of the premises. You will be required to make monthly payments to Chick-fil-A. The monthly payments will include all of the monthly base rent, percentage rent, and any other extra or additional charges and rents due under the Lease.
  • If Chick-fil-A leases the premises on which a free-standing Chick-fil-A Restaurant is operated, under the terms of the Lease, you will be a sublessee of the premises and must comply with the obligations imposed on Chick-fil-A as the primary lessee of the premises and imposed by Chick-fil-A upon you as a sublessee. You will be required to make monthly payments to Chick-fil-A. The monthly payments will include all of the monthly base rent, percentage rent, and any other extra or additional charges and rents due under the Lease.

6.  Insurance:  $125 to $6,800 per month

7.  Equipment Rental:  $750 to $2,000 per month

  • The equipment rental varies depending on the type of restaurant location:
  • Free-Standing and In-Line:  $2,000/month;
  • Drive-Through only:  $1,500/month;
  • Mall:  $1,250/month;
  • Satellite:  $750/month.

8.  Hardware and Software Support; High-Speed Internet Access:  $1,000 to $4,500 per year

9.  Fines – Minimum Standards and Procedures:  will vary under circumstances

  • May be charged when you fail to maintain all applicable Minimum Standards or comply with the Franchise Agreement.

10.  Indemnification:  will vary under circumstances

  • You have to reimburse the franchisor if it is held liable for claims arising from the operation of your franchised Chick-fil-A Restaurant business or damage to the site.

11.  Operating Service Fee:  determined by formula (monthly)

  • “Base Operating Service Fee” for a particular restaurant for each calendar month is the amount by which 15% of the Gross Receipts for the month exceeds the monthly equipment rental payable and business services fee for the calendar month.
  • “Additional Operating Service Fee” as to a particular restaurant for each calendar month is, in the case of the Initial Business (i.e. your first restaurant), 50% of the Net Profit for Initial Business for the month.
  • “Net Profit for Initial Business” of the Initial Business for each calendar month is the difference between: (i) the Operating Profit for the month; and (ii) the sum of: [A] the Base Operating Service Fee for the month, [B] the Base Profit for the month, [C] the Base Profit Offsets, and [D] the Service Fee Offsets at the effective date of computation.
  • “Operating Profit” for a particular restaurant for each calendar month is the amount by which Gross Receipts exceeds the ordinary and necessary expenses (as this term is reasonably determined by Chick-fil-A) incurred by you for the restaurant during the month.
  • “Base Profit” for Initial Business for each calendar month is $1,000; you are not entitled to Base Profit with respect to any additional restaurant.

12.  Credit Card Fees and Related Processing Fees:  will vary

  • Pursuant to contracts negotiated by the franchisor on behalf of the Chick-fil-A system with various credit card and processing vendors, certain processing and other related fees are imposed by each vendor with respect to its particular card(s) based upon the credit card sales made by your Chick-fil-A Restaurant business.
  • You may be required to enter into contracts directly with such credit card and/or processing vendors.
  • These fees vary under a wide degree of circumstances, and are nonrefundable.

13.  Highway Signage:  will vary under circumstances

  • Actual cost plus set up charges incurred by Chick-fil-A in securing municipal highway signage opportunities for your Chick-fil-A Restaurant.

14.  Interest on Late Payments:  the maximum rate permitted by law, or if none, 1.25% per month

  • Any payment or other amount owed the franchisor under the Franchise Agreement, including any attached Lease(s), will bear interest, compounded monthly after the due date.

15.  Cash Handling System Services:  $150 to $450 per month

  • Pursuant to vendor contracts negotiated by the franchisor on behalf of the Chick-fil-A system, the franchisor will bill and collect certain fees and expenses that are charged by a vendor for cash handling system services provided each month by the vendor at your Chick-fil-A Restaurant business.
  • You may be charged additional fees for non-warranty safe repairs; the amount will vary as incurred.

16.  Reimbursement of Cost of Performance:  costs and expenses of performance

  • If you fail to perform your obligations under the Lease, Chick-fil-A may perform and you will reimburse Chick-fil-A’s cost, together with interest.

17.  Holdover Liquidated Damages:  double the base rent and percentage rent

  • If you holdover or remain in occupancy of the premises after your Lease terminates or expires, the base rent and percentage rent will double, as liquidated damages and not as a penalty, but payment will not waive Chick-fil-A’s other rights or remedies.

If you are looking for information on the estimated initial investment for a Chick-fil-A franchise, check out this post:   Franchise Costs:  Detailed Estimates of Chick-fil-A Franchise Costs




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