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Considering a Pieology Franchise? Don’t Overlook These 21 Important Franchise Fees

by Franchise Chatter on November 16, 2016

in Franchise Fees, Pizza Franchises



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Pieology Assembly Line

This post was updated on June 13, 2017 to reflect information from Pieology’s 2017 FDD.

If you are considering a Pieology franchise, don’t get blindsided by these 21 important franchise fees (from the initial franchise fee, to the royalty fee, to 19 other fees found in Items 5 and 6 of Pieology’s 2017 FDD).

1.  Initial Franchise Fee:  $25,000

  • You must pay Pieology a $25,000 initial franchise fee when you sign the Franchise Agreement.
  • If you (or your affiliate) previously signed a Development Rights Agreement or similar agreement that covers the Franchise Agreement, then Pieology will apply a portion of the development fee paid under that agreement towards the initial franchise fee.
  • If you sign the Development Rights Agreement, the initial franchise fee of $25,000 will be the same amount for each of the Franchise Agreements that the Development Rights Agreement covers.
  • The initial franchise fee is not refundable.

2.  Initial Training Fee:  $5,000 to $15,000



  • You must also pay Pieology an initial training fee when you sign the Franchise Agreement in an amount equal to $15,000 if the Franchise Agreement is for the first Pieology Restaurant that you (or your affiliates) develop in the Restaurant’s market area, $7,500 if the Franchise Agreement is for the second Pieology Restaurant that you (or your affiliates) develop in the Restaurant’s market area, and $5,000 if the Franchise Agreement is for the third and all future Pieology Restaurants that you (or your affiliates) develop in the Restaurant’s market area.
  • Part of the initial training program involves Pieology sending a training team to the Restaurant for its opening. You also must reimburse Pieology for any additional expenses it incurs if you change the opening schedule and cause it to reschedule its travel arrangements, or if you want Pieology’s training team to remain at the Restaurant for an extra day.
  • Also, if Pieology determines that you or any of your personnel cannot complete the initial training programs to its satisfaction, then it may require you or your personnel to attend additional training programs at your expense. Pieology expects your cost for these additional expenses will range from $0 to $5,000.
  • However, Pieology will not charge an initial training fee, and it will not provide a training team for the Restaurant, if you or your affiliate is designated by Pieology as a Certified Training Franchisee in your Restaurant’s market area.
  • If you sign the Development Rights Agreement, these training fees apply for all Franchise Agreements that the Development Rights Agreement covers.

3.  Extension Fee:  $3,500 per month

  • You must develop and open the Restaurant to the public on or before the Opening Deadline. If you want to request an extension of the Opening Deadline, you must send Pieology written notice at least 15 days before the Opening Deadline.
  • Pieology will inform you of the length of the extension, if and when it grants such extension. If Pieology grants it, you must pay Pieology a nonrefundable extension fee equal to $3,500 for each month (or portion of a month) for which Pieology extends the Opening Deadline.

4.  Development Rights Agreement:  $10,000 times the number of Pieology Restaurants that you agree to develop under the Schedule

  • If you sign a Development Rights Agreement, you must pay Pieology a development fee in a lump sum when you sign that Agreement. The development fee is $10,000 multiplied by the number of Pieology Restaurants that you agree to develop under the Schedule.
  • Pieology will insert the amount of this fee in the Development Rights Agreement before signing it.
  • The development fee is non-refundable, but Pieology will apply $10,000 of the development fee toward the initial franchise fee owed under each Franchise Agreement that the Development Rights Agreement covers.
  • During Pieology’s 2016 fiscal year, franchisees paid initial franchise and training fees under their Franchise Agreements of $40,000, and developers paid development fees under their Development Rights Agreements ranging from $20,000 to $400,000.

5.  Royalty:  5% of Restaurant’s weekly Gross Sales

  • Due Date:  Tuesday of each week.
  • If you sign the Development Rights Agreement, the Royalty applies for all Franchise Agreements that the Development Rights Agreement covers.
  • “Gross Sales” means all revenue that you receive or otherwise derive from operating the Restaurant, whether from cash, check, credit and debit card, stored value card, barter, exchange, trade credit, other credit, or other electronic transactions, including sales from providing Catering Services and Delivery Services.
  • If you receive any proceeds from any business interruption insurance applicable to loss of revenue at the Restaurant, an amount equal to the imputed Gross Sales that the insurer used to calculate those proceeds is added to Gross Sales.
  • However, “Gross Sales” excludes (a) sales taxes, use taxes, and other similar taxes that you add to the sales price, collect from the customer, and pay to the appropriate taxing authority; and (b) sales for which you have refunded cash, if you previously included those sales in Gross Sales.
  • Pieology treats each charge or sale upon credit as a sale for the full price on the day during which that charge or sale is made, regardless of when you receive payment (whether full, partial, or at all) on that sale.
  • Pieology includes amounts that customers pay by gift card, stored value card, or similar program in Gross Sales when the instrument or credit is redeemed.

6.  Marketing Fund:  currently 2% of Restaurant’s weekly Gross Sales

  • Due Date:  Tuesday of each week.
  • The “Marketing Spending Requirement” is the maximum amount that Pieology can require you to spend on Marketing Fund contributions, Cooperative (defined below) contributions (if applicable), and approved Local Marketing for the Restaurant during each calendar quarter, and is an amount equal to 4% of the Restaurant’s Gross Sales during the calendar quarter.
  • Although Pieology may not require you to spend more than the Marketing Spending Requirement on Marketing Fund contributions, Cooperative contributions (if applicable), and approved Local Marketing for the Restaurant during any calendar quarter, you may choose to do so.
  • Pieology will not count towards your Marketing Spending Requirement the cost of free or discounted menu items, coupons, special offers, or price reductions that you provide as a promotion; signs; lighting; personnel salaries; administrative costs; transportation vehicles (even if they display the Marks); employee incentive programs; or other amounts that Pieology, in its reasonable judgment, deems inappropriate for meeting the Marketing Spending Requirement.
  • Pieology may periodically modify the amounts it requires you to spend on each of the Marketing Fund contributions, Cooperative contributions (if applicable), and approved Local Marketing for the Restaurant, but the total required expenditure will not be more than 4% of the Restaurant’s Gross Sales during any calendar quarter.
  • If you fail to spend (or prove that you spent) the Marketing Spending Requirement in any quarter, then Pieology may, without limiting its other rights, require you to pay to it the shortfall as an additional Marketing Fund contribution, or to pay to it the shortfall for it to spend on Local Marketing for the Restaurant.

7.  Advertising Cooperative Contributions:  none currently required

  • Due Date:  As Cooperative determines.
  • Currently, there are no Cooperatives.
  • Pieology may designate a geographic area in which 2 or more Pieology Restaurants are located as an area for an advertising or marketing cooperative (a “Cooperative”). The Cooperative’s members in any area are the owners of all Pieology Restaurants operating in that area, including the franchisor and its affiliates, if applicable.
  • All material decisions of the Cooperative, including contribution levels (which also require Pieology’s approval), will require the affirmative vote of more than 50% of all Pieology Restaurants participating in the Cooperative (including, if applicable, those the franchisor or its affiliates operate), with each Pieology Restaurant receiving 1 vote.

8.  Additional Training or Assistance:  will vary under circumstances

  • Due Date:  As incurred.
  • Due only if Pieology requires, or you ask it to provide, additional or special training, guidance, or assistance, including its personnel’s salaries and per diem charges (currently $50), plus travel and lodging expenses.

9.  Supplier Approval Costs:  reasonable costs of inspection and actual costs of test

  • Due Date:  As incurred.
  • Due only if you ask Pieology to evaluate a new supplier for approval.

10.  Costs to Correct Deficiences:  Pieology’s costs, plus an administrative fee of 15% of its costs

  • Due Date:  As incurred.
  • Due only if you fail to correct deficiencies concerning site, Restaurant, or Operating Assets after notice from Pieology.

11.  Inspection and Corrective Re-Assessment Fees:  Pieology’s costs and expenses

  • Due Date:  As incurred.
  • Due for any inspection you request or Pieology conducts to confirm you have corrected deficiencies.

12.  Relocation Expenses:  Pieology’s out-of-pocket expenses



  • Due Date:  As incurred.
  • Due if you relocate the Restaurant during the Franchise Agreement’s term.

13.  Transfer Fee:  $1,000 for non-control transfer, or 50% of then-current initial franchise fee (currently $12,500) for control transfer

  • Due Date:  Upon Pieology’s approval of transfer.

14.  Successor Franchise Fee:  greater of $6,500 or 25% of then-current initial franchise fee

  • Due Date:  Upon signing successor franchise agreement.

15.  Audit Expenses:  cost of audit, which Pieology currently estimates at $500 to $5,000

  • Due Date:  15 days after billing.
  • Due if you understate the Restaurant’s Gross Sales by more than 2%, or do not furnish reports, supporting records, or other required information.

16.  Late Payment Interest and Administrative Fee:  lower of 1.5% per month or the highest allowable commercial contract interest rate, plus $500 administrative fee

  • Due Date:  15 days after billing.
  • Due for each late payment.

17.  Management Fee:  3% of Gross Sales, plus out-of-pocket expenses

  • Due Date:  As incurred.
  • Due only if Pieology manages your Restaurant after your (or your owner’s) death, disability, or default, or while it is considering whether to exercise purchase option.

18.  Costs and Attorneys’ Fees:  will vary under circumstances

  • Due Date:  As incurred.
  • Due if you do not comply with the Franchise Agreement or Development Rights Agreement.

19.  Indemnification:  will vary under circumstances

  • Due Date:  As incurred.
  • You must reimburse Pieology and its affiliates if it or they are held liable for claims arising from your Restaurant’s development or operation, or your breach of the Franchise Agreement or Development Rights Agreement.

20.  Insurance:  Pieology’s premiums, costs, and expenses

  • Due Date:  When billed.
  • Due only if you fail to maintain insurance, and Pieology (at its option) obtains it for you.

21.  SBA Addendum Fee:  currently, $1,000, plus reimbursement of Pieology’s out-of-pocket expenses to review and process

  • Due Date:  As incurred.
  • Due only if you intend to refinance your business and you request Pieology to accept the terms of the Addendum to Franchise Agreement required by the Small Business Administration as a condition to your participation in its lending program to franchisees.

Notes:

  • All fees listed above are uniform, although Pieology might charge different fees to franchisees who already have signed agreements with it. All fees are imposed and collected by and payable to Pieology, and are non-refundable, but it will refund any overpayments made in error.
  • You must sign and deliver to Pieology the documents it periodically requires (currently the Electronic Funds Transfer Agreement) to authorize it to debit your bank account automatically for the Royalty, Marketing Fund contribution, and other amounts due under the Franchise Agreement or any related agreement between Pieology (or its affiliates) and you.
  • If you fail to report the Restaurant’s Gross Sales, Pieology may debit your account for 120% of the last Royalty and Marketing Fund contribution that it debited. If the amounts that Pieology debits from your account are less than the amounts you actually owe (once it has determined the Restaurant’s actual Gross Sales), it will debit your account for the balance, plus the interest and administrative charges, on the day it specifies.
  • If the amounts Pieology debits from your account are greater than the amounts you actually owe (once it has determined the Restaurant’s actual Gross Sales), it will credit the excess (without interest) against the amounts it otherwise would debit from your account during the following month(s).
  • Pieology may periodically change the mechanism for your payments of Royalties, Marketing Fund contributions, and other amounts you owe.

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



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