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Considering a Kona Ice Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on November 22, 2016

in Franchise Fees, Frozen Dessert Franchise

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

Kona Ice Franchise

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

1.  Initial Franchise Fee:  $15,000

  • You must pay Kona Ice an initial franchise fee (“Initial Franchise Fee”) of $15,000 when you sign the Franchise Agreement.
  • Each Franchise Agreement will grant you the right to operate 1 Truck and Additional Equipment in the Protected Territory. If you desire to operate more than 1 Truck, you will be required to purchase an additional Kona Ice Franchise for each Truck.
  • The Initial Franchise Fee is due in full at the time you sign the Franchise Agreement(s), and is deemed fully earned by Kona Ice once paid and is not refundable.

2.  Territory Reservation Fee:  $10,000

  • Franchisees may also reserve territories that are adjacent to the Protected Territory by paying a territory reservation fee of $10,000 per territory (“Territory Reservation Fee”), paying a non-refundable $5,000 deposit for the purchase of a Truck, and signing the “Agreement of Provisional Territory Hold with Intent to Purchase Additional Franchise” which is attached as Exhibit H to the Disclosure Document.
  • The Territory Reservation Fee will be applied to the Initial Franchise Fee if you execute a new Franchise Agreement for an additional Kona Ice Franchise.
  • The Territory Reservation Fee and Truck deposit is uniform and nonrefundable even if you do not open an additional Kona Ice Franchise.

3.  Truck:  $89,650

  • You will be required to purchase 1 Truck for $89,650 from Kona Ice. You will pay a nonrefundable $5,000 deposit when you sign the Franchise Agreement and the remaining balance of $84,650 when you take delivery of your Truck.
  • You will be required to pay for any optional customization or additional features that you request that are not standard on the Truck.
  • Truck payments are nonrefundable even if you do not open a Kona Ice Franchise.
  • The Truck will come equipped with an ice shaving machine, two cold plate freezers, Kona Ice’s proprietary music system, and its proprietary patented “FlavorWave Self-Service System” (US Patent Number 8,157,136). This station allows the customer to choose and apply his or her own flavorings to the shaved ice product.

4.  Truck Compliance Fee:  $0 to $4,000

  • You may be required to pay a fee in the event that Kona Ice or its affiliate needs to modify any part of the Truck from its standard specifications in order to meet with relevant state or local health department requirements in your Protected Territory.
  • Should modifications be required on the Truck, Kona Ice estimates this fee to cost between $0 and $4,000.
  • These payments are nonrefundable.

5.  Initial Inventory:  $4,875

  • Kona Ice requires all franchisees to purchase an initial supply of cups and flavorings, a graphics package, and a Kona Ice welcome box that includes branded t-shirt uniforms from Kona Ice before you begin operation of your Kona Ice Business.
  • The cost of the initial inventory is $4,875 and is to be paid prior to the start of your Kona Ice Business and is nonrefundable.

6.  Optional Inventory:  $500

  • You may, but are not required to, purchase branded merchandise from Kona Ice such as stuffed penguins, beach balls, shirts, and hats for approximately $500, depending on the quantity you purchase.
  • These payments are nonrefundable.

7.  Royalty:  $3,000 annually for the first 5 years, $3,500 for the next 2 years, and $4,000 for the remaining 3 years

  • Due Date:  3 equal installments due June 30, July 31, and August 31 of each year, payable beginning the first calendar year in which you take delivery of the Truck.
  • Kona Ice reserves the right to charge additional Royalties for the use of Additional Equipment.
  • If you are renewing your Franchise Agreement or purchasing an existing Franchise Agreement, the date for determining Royalty payments will be determined from the date the initial Franchise Agreement was signed.

8.  Additional Equipment Royalty:  varies based on the type of Additional Equipment (currently $600 to $1,000 per year)

  • Due Date:  Same as Royalty.
  • You may purchase any Additional Equipment for use in your Protected Territory. You are not required to purchase any Additional Equipment during the term of the Franchise Agreement.
  • As of the issuance date of the 2016 Franchise Disclosure Document, the Additional Equipment offered, the purchase price, and the Additional Equipment Royalty amount are as follows:
  • Kona Entertainment Trailer:  $35,800 plus shipping (purchase price); $1,000 annually (Royalty)
  • Kona Entertainment Kiosk:  $27,500 plus shipping (purchase price); $750 annually (Royalty)
  • Kona Kompanion:  $2,775 plus shipping (purchase price); no Royalty
  • Kona Mini:  $24,650 plus shipping (purchase price); $600 annually (Royalty)
  • These amounts are subject to change.
  • You may not purchase any Additional Equipment until your Truck is operating in your Protected Territory.
  • The Additional Royalty will be due for as long as you own the Additional Equipment.

9.  Territory Infringement Fee:  $1,000 plus invoice amount for first violation; $5,000 plus invoice amount for second and subsequent violations

  • Due Date:  As incurred.
  • Payable to Kona Ice if you infringe on another Kona Ice franchisee’s Protected Territory by receiving payment for goods and/or services provided and/or rendered within the other franchisee’s Protected Territory without that franchisee’s and/or Kona Ice’s permission.
  • Kona Ice may direct the funds at its option.

10.  Marketing Fund:  currently $500 per year

  • Due Date:  Annually on or before June 30.
  • Kona Ice has established a system wide “Marketing Fund.” Amount can be raised annually based upon the Consumer Price Index (“CPI”), and/or increased for marketing projects upon approval of the “Advertising Advisory Board.”

11.  Additional Training:  then-current fee (currently approximately $0)

  • Due Date:  As incurred.
  • Kona Ice may charge you for training newly-hired personnel, refresher training courses, advanced training courses, and additional or special assistance or training you may need or request.
  • The fee amount will depend on the training required and experience level of the trainer.

12.  Kona E-mail Address Fee:  $60 per e-mail address per year

  • Due Date:  Annually on or before October 1.
  • Payable to Kona Ice for each e-mail address it establishes for you.

13.  Customer Satisfaction Reimbursement:  will vary under circumstances

  • Due Date:  As incurred.
  • Kona Ice may, in its sole discretion, remedy any issues with customers of your Kona Ice Business, including full reimbursement of any fees paid to you. You are required to reimburse Kona Ice for any such costs.

14.  Non-Compliance Fee:  $250 for the first violation; $500 if violation is not corrected within 30 days; $100 per day if violation not corrected within 30 more days

  • Due Date:  As incurred.
  • This fee is assessed if you receive notice that you are failing to follow Kona Ice’s system standards, failing to comply with the provisions of the Franchise Agreement, or failing to follow the provisions of its operating manual.
  • This fee is in addition to any and all remedies that Kona Ice has available under the Franchise Agreement.

15.  Misappropriated Success Guide Fee:  will vary under the circumstances

  • Due Date:  On demand.
  • Kona Ice’s “Success Guide” contains valuable intellectual property and trade secrets. Each franchisee will get one copy of the Success Guide.
  • If you lose, give away, make unauthorized copies, fail to return, or otherwise misappropriate all or some of the Success Guide, you will be required to pay Kona Ice liquidated damages to offset the damages that it will incur as a result of this misappropriation.
  • These liquidated damages are determined by taking Kona Ice’s total revenue from its previous fiscal year, multiplied by the fraction which results from taking 1 divided by the current number of Kona Ice franchisees as of the date of the misappropriation, except that this fee will not, under any circumstances, be less than $30,000.

16.  Payment Service Fees:  up to 3% of total charge

  • Due Date:  As incurred.
  • If payment is made to Kona Ice or its affiliates by credit card for any fee required, it may include a service fee of up to 3% of the total charge.

17.  Late Fees:  $25 per day, plus the lesser of the daily equivalent of 12% per year simple interest or the highest rate allowed by law

  • Due Date:  On demand.
  • Payable if any payment due to Kona Ice or its affiliate is not made by the due date.
  • Interest accrues from the original due date until payment is received in full.

18.  Returned Check or Insufficient Funds Fee:  $100

  • Due Date:  As incurred.
  • Payable if any check or electronic funds transfer payment is not successful due to insufficient funds, stop payment, or any similar event.

19.  Indemnification:  will vary under circumstances

  • Due Date:  As incurred.
  • You must indemnify and reimburse Kona Ice for any expenses or losses that it or its representatives incur related in any way to your Kona Ice Business or Franchise.

20.  Professional Fees and Expenses:  will vary under circumstances

  • Due Date:  As incurred.
  • You must reimburse Kona Ice for any legal or accounting fees that it incurs as a result of any breach or termination of your Franchise Agreement.
  • You must reimburse Kona Ice if it is required to incur any expenses in enforcing its rights against you under the Franchise Agreement.

21.  Renewal Franchise Fee:  $5,000

  • Due Date:  At the time you sign the successor Franchise Agreement.
  • Payable if you qualify to renew your Franchise Agreement and choose to enter into a successor Franchise Agreement.

22.  Transfer Fee:  $5,000

  • Due Date:  $1,000 nonrefundable deposit at time of transfer application submittal and the remaining balance of fee at time of approved transfer.
  • Payable in connection with the transfer of your Kona Ice Business, a transfer of ownership of your legal entity or the Franchise Agreement.
  • Kona Ice does not charge a transfer fee if you transfer your Franchise to your child, parent, sibling, or spouse.

23.  Truck Remodel or Truck Upgrades:  $0 – $15,000 (The average in 2015 was $4,810)

  • Due Date:  Upon execution of successor Franchise Agreement, upon a Truck rewrap, or upon a transfer of an existing Truck that has not completed the required remodels.
  • Payable to Kona Ice:
  • (i) upon execution of successor Franchise Agreement for a Kona Ice Franchise with a Truck that has not completed the required remodels or is not in compliance with current standards, or
  • (ii) for the transfer of a Kona Ice Business with a Truck that has not completed the required remodels or is not in compliance with current standards, or
  • (iii) if Kona Ice rewraps your Truck in your seventh year of operations.

24.  Mystery Shopper Fee:  up to $50 per occurrence (currently, $0 per occurrence)

  • Due Date:  On demand.
  • Due if you do not successfully pass a mystery shop of your Kona Ice Business.

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