Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

  • Anytime Fitness
  • CruiseOne
  • Firehouse Subs
  • Jimmy John's
  • Massage Envy
  • Menchie's
  • Orange Leaf Frozen Yogurt
  • Planet Fitness
  • The UPS Store
  • Yogurt Land
  • And Hundreds More...

No, thanks. I'm not interested in uncovering the actual earnings of hundreds of franchises at this time.

Considering a Little Caesars Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on November 15, 2016

in Franchise Fees, Pizza Franchises

Franchise Chatter Membership Information

Don't Invest in a Franchise Until You Check Out This List

Little Caesars Pizza Photo by The Salvation Army St. Louis

If you are considering a Little Caesars franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other franchise fees found in Items 5 and 6 of Little Caesars’ 2016 FDD).

1.  Initial Franchise Fee:  $20,000

  • The standard initial franchise fee is $20,000.
  • However, Little Caesars reduces the initial franchise fee for its existing franchisees in certain circumstances, as set out below:
  • If you are a new franchisee purchasing a franchise for your first Restaurant:  $20,000
  • Existing franchisee purchasing an additional franchise under the same franchise number (this means that the additional franchise must have exactly the same ownership and be in the same geographic area as the existing franchise):  $15,000
  • Existing franchisee signing a new franchise agreement when the full term (initial 10-year term, plus 10-year renewal term) of the original agreement comes to an end (“Full-Term Franchisee”):  $15,000
  • Full-Term Franchisee signing a new franchise agreement with a higher royalty rate than in the original agreement, and ownership of the franchise has not changed from the outset of the original agreement:  $10,000
  • If the franchise will be for a new Restaurant, you must pay Little Caesars a non-refundable $5,000 initial franchise fee deposit within 30 days after it approves the franchise, and in any case, before it will review a proposed site for the new Restaurant.
  • The remainder of the initial franchise fee is due when you sign the Franchise Agreement or when Little Caesars approves a site for your proposed Restaurant, whichever is earlier.
  • The initial franchise fee is non-refundable.
  • If you qualify for Little Caesars’ franchise program for U.S. military veterans, it will reduce the initial franchise fee by $5,000 for your first Little Caesars Restaurant. In addition, it will give you a $5,000 credit toward the initial purchases from Blue Line for the equipment needed for your first Restaurant.
  • If you are a service-disabled veteran who qualifies for the Veterans program, Little Caesars will waive the initial franchise fee for your first Little Caesars Restaurant and give you a Blue Line credit of $10,000.
  • To qualify for the Veterans program, you must have been honorably discharged, cannot be an existing Little Caesars franchisee, and may have to satisfy other prerequisites.
  • Veterans who participate in this program must agree to use an approved accounting firm for at least the first 2 years of operation and to permit the accounting firm to provide certain information directly to Little Caesars.
  • Little Caesars reserves the right to modify or cancel the Veterans program at any time.

2.  Pre-opening Purchases from Blue Line:  $63,000 to $154,000

  • If your franchise will be for a new Restaurant, in addition to paying Little Caesars the initial franchise fee, you must purchase goods from Blue Line before opening the Restaurant. Every Restaurant and market is different, however, so your needs and the actual cost may vary.
  • Your payments for these items are non-refundable.
  • Franchisees who are signing a franchise agreement for the 10-year renewal term (“Renewing Franchisees”) and Full-Term Franchisees (as defined above) will not have pre-opening purchases, because the Restaurant is already open. However, franchisees in these categories may have to purchase new equipment and other items before the new contract term begins.
  • Franchisees of LC Express units will have fewer pre-opening purchases.

3.  Territory Reservation Fee:  $5,000 per Restaurant

  • If you enter into a Territory Reservation Agreement, you must pay a Territory Reservation Fee of $5,000 per Restaurant (or such lesser amount as Little Caesars may determine).
  • Little Caesars determines the number of Restaurants required under the Development Schedule based on the size and population of the Reserved Territory and other factors.
  • A Territory Reservation Agreement generally provides for development of 4 Restaurants, so the Territory Reservation Fee is generally $20,000.
  • If you wish to develop more than 4 Restaurants, Little Caesars typically will enter into a separate Territory Reservation Agreement for each increment of Restaurants. However, it is possible that a Territory Reservation Agreement may allow for development of more than 4 Restaurants, in which case the initial Territory Reservation Fee for that agreement will be higher than $20,000.
  • When paid, the Territory Reservation Fee is fully earned and nonrefundable.
  • This Territory Reservation Fee is in addition to the initial franchise fee and other fees that you must pay under each Franchise Agreement.

4.  Royalty:  the greater of 6% of Gross Sales for each one-week period, or $100 for each one-week period

  • Due Date:  At the end of each one-week period via electronic funds transfer or such other time and manner as Little Caesars may specify.
  • “Gross Sales” means revenue from the sale of all products and services and all other income or consideration of every kind and nature received by the Restaurant, including all revenues associated with games and/or selling products or services off-premises to customers, and any proceeds from business interruption insurance, whether for cash or credit, and regardless of collection in the case of credit, less any sales taxes or other taxes collected by you from customers and thereafter paid directly to the appropriate taxing authority.
  • Gross Sales do not include refunds, certain credits (as long as the original sale was included in Gross Sales), certain permitted discounts, and sales taxes that are added to the selling price and actually paid to the taxing authority.

5.  Advertising Fee:  up to 7% of Gross Sales, as determined by Little Caesars

  • Due Date:  Same as royalty.
  • Little Caesars allocates your total advertising obligation among contributions to a system-wide fund called Caesar Fund, contributions to an advertising cooperative (if applicable), and expenditures on local advertising.

6.  Caesar Vision System Annual Support Fee:  $1,500 per year per Restaurant in which Caesar Vision has been installed, if you have at least one SME for every 7 installed Restaurants; $3,000 per year per installed Restaurant, if you have fewer than one SME for every 7 installed Restaurants or if your SME fails to attend required training sessions; $750 per year per Restaurant for digital menu board system alone

  • Due Date:  Annually in January.
  • Little Caesars owns an integrated point-of sale, kitchen dashboard, and digital menu board system known as the “Caesar Vision” system. The Caesar Vision system is not mandatory for franchisees as of the date of the 2016 disclosure document, but Little Caesars may make it mandatory.
  • Payable to Blue Line if you install the Caesar Vision system.
  • “SME” means a trained Caesar Vision subject-matter expert who understands the Caesar Vision system and its components.

7.  Per Diem for Onsite Caesar Vision support:  $1,500 per day per technician

  • Due Date:  As incurred.
  • Payable to Blue Line if you request onsite support to train your staff or troubleshoot problems with the Caesar Vision system.

8.  M.I.K.E. System Connection Fees:  to be determined

  • Due Date:  At time of installation and monthly thereafter.
  • The Modern Integrated Kitchen Equipment system or M.I.K.E system is a proprietary automated food production system. The M.I.K.E. system is not mandatory for franchisees as of the date of the 2016 disclosure document, but Little Caesars may make it mandatory.
  • If you install the M.I.K.E. system, it must be continuously connected to Little Caesars’ system via the Internet.
  • As of the date of the disclosure document, no decision has been made on whether Blue Line will charge a fee for the initial connection or the ongoing connection.

9.  Audit by Franchisor:  Little Caesars’ actual costs of audit, plus lodging, wage, accounting, and legal costs

  • Due Date:  As incurred.
  • Payable only if audit reveals an understatement of 2% or more in reported Gross Sales.

10.  Additional Training:  not more than $250 per attendee for initial training of additional employees

  • Due Date:  10 days after billing.

11.  Transfer Fee:  varies from $0 to $5,000 per Restaurant

  • Due Date:  Before transfer.

12.  Renewal Fee:  $5,000

  • Due Date:  At the time you sign your Franchise Agreement and Renewal Addendum.

13.  Indemnification:  will vary with circumstances

  • Due Date:  As incurred.

14.  Special Marketing, Management, and Operational Assistance Performed at Your Request:  reasonable fee, plus expenses

  • Due Date:  20 days after billing.

15.  Private Securities Offering:  $25,000, plus additional sums to cover Little Caesars’ out-of-pocket costs to review the materials if greater than $25,000

  • Due Date:  At the time offering materials are submitted to Little Caesars for review; when incurred if greater than $25,000.
  • You must obtain Little Caesars’ approval before making a private offering of securities. All such offerings are subject to its right of first refusal.
  • The Franchise Agreement prohibits public offerings of your securities.

16.  Relocation Fee:  $2,500

  • Due Date:  When you submit the relocation request package.
  • You may relocate a Restaurant only with Little Caesars’ permission. The new location must be within a one mile radius of the original location and must open within 6 months of the original location’s closure.
  • The relocation fee is refundable only if Little Caesars does not approve your request.

17.  Interest:  18% per year or the maximum rate permitted by law, whichever is less

  • Due Date:  As incurred.
  • Calculated from the date the amounts were originally due to Little Caesars or its affiliates.

18.  Late Fee:  Little Caesars’ then-current late fee

  • Due Date:  Due immediately after date the amounts were originally due to Little Caesars or its affiliates.

19.  Missed Meeting Fee:  varies

  • Due Date:  20 days after billing.
  • Little Caesars can charge you a reasonable fee if you fail to attend a required meeting, conference, or seminar.

20.  Manual Update or Replacement Fee:  the then-current fee

  • Due Date:  When Little Caesars provides replacement.
  • You must pay Little Caesars the fee for each updated version of the ORG and for replacement of any lost or destroyed copies.

21.  Management Fee:  commercially reasonable fee

  • Due Date:  20 days after billing.
  • Payable only if a principal owner of the franchise has been arrested for or charged with a serious criminal offense and Little Caesars elects to take over operation of the Restaurant pending final disposition of the charges.

22.  Liquidated Damages Upon Termination for Your Default:  see formula below

  • Little Caesars calculates the liquidated damages as follows:
  • (a) your average royalty fees and advertising fees payable each month over the 12-month period immediately preceding the date of termination (or, if the Restaurant has been open less than 12 months, the average royalty fees and advertising fees payable each month the Restaurant was open);
  • (b) multiplied by the lesser of (i) 36 months, or (ii) the number of months then remaining in the then-current term of the Franchise Agreement.
  • Due Date:  Effective date of termination.
  • Payable in lieu of any damages for Little Caesars’ lost future revenue as a result of your default; but this is in addition to any other damages, costs, and expenses to which Little Caesars may be entitled.

23.  Liquidated Damages for Failure to Comply with Post-Termination Obligations:  $250 per day

  • Due Date:  As incurred.
  • Payable if you fail to comply with your obligations arising upon expiration or termination of the Franchise Agreement.
  • These obligations are summarized in Item 17 of this disclosure document.
  • Little Caesars can draw $10,000 from your bank account at the time of expiration or termination to cover potential liquidated damages as well as the expenses described in no. 24 below.
  • Upon completion of de-identification of the Restaurant and payment of the expenses described below, if any, Little Caesars will refund any unused portion of the $10,000.
  • If the $10,000 is insufficient to satisfy your obligations, Little Caesars will invoice you for the balance.

24.  Costs and Legal Fees:   Little Caesars’ actual costs

  • Due Date:  Upon demand.

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

Franchise Matching Quiz

Franchise Matching Quiz

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: