Considering a Mathnasium Franchise? Don’t Overlook These 18 Important Franchise Fees

This post was updated on April 20, 2017 to reflect information from Mathnasium’s 2017 FDD (Items 5 and 6).

If you are considering a Mathnasium franchise, don’t get blindsided by these 18 important franchise fees (from the initial franchise fee, to the royalty fee, to 16 other fees found in Items 5 and 6 of Mathnasium’s 2017 FDD).

1.  Initial Franchise Fee:  $26,500 to $40,000

• Mathnasium’s initial franchise fee is $40,000 for your first franchise. You must pay the entire fee when you sign the Franchise Agreement. This fee is fully earned by Mathnasium once paid and is not refundable except as described below.

• If Mathnasium elects to withdraw its approval of you as a franchisee during or at the conclusion of the initial training program, it will return the initial franchise fee to you, less the costs it has incurred in marketing, awarding, and processing your franchise and in providing training to you.

• The initial franchise fee is used (in addition to other purposes) to pay for the costs of the initial training program, up to 6 hotel room nights during the initial training program, the apprenticeship training program, and the first 6 months of your base royalty (first center only).

• For training programs, you must pay all other expenses, including travel and lodging, not otherwise stated as covered.

• Prior to the time the initial franchise fee and Franchise Agreement are submitted, franchisees are required to submit to a background check which includes a criminal/civil record search and may include a credit check. Mathnasium will not countersign a Franchise Agreement until it has received results of the search and check.

• If Mathnasium determines that you are unsuitable to run a Mathnasium center as a result of background check and credit check results, it reserves the right to not accept you as a franchisee and to terminate any agreements between it and you and return to you any initial franchise fee paid.

• If you are purchasing an additional franchise, you will pay a discounted initial franchise fee of $26,500. Mathnasium may finance $15,000 of the initial franchise fee. If it does, you will pay $11,500 when you sign the Franchise Agreement and will pay the balance by signing a 12% simple interest per year promissory note for $15,000, to be paid in equal monthly installments over 20 months (i.e. $831 per month).

• Mathnasium is a participant in the International Franchise Association VetFran Program. If you are a qualifying veteran honorably discharged from the U.S. Armed Forces (Navy, Marines, Army, Air Force, Coast Guard, and National Guard) or if you are an active duty member of the U.S. Armed Forces on the effective date of the Franchise Agreement, Mathnasium will reduce the initial franchise fee for your first center by 25%.

• If you choose to pay the initial franchise fee by credit card, you must also pay Mathnasium the bank charges it incurs for credit card processing. Currently, the charge is 2.5% of the transaction amount.

• The range of actual initial franchise fees charged in Mathnasium’s last fiscal year ending December 31, 2015 was from $0 to $40,000, the higher amount being the amount charged for initial fees for the first unit.

• Mathnasium reserves the right to change the initial franchise fee or discounts given at anytime before you purchase a franchise.

2.  Monthly Royalty:  initially, 10% of your monthly gross receipts from all sources as a result of operating your center, plus a base royalty fee of $500 per month (payable on the first center only). Beginning in the 24th month of operation of the center, the base royalty fee plus the greater of (i) the 10% monthly royalty or (ii) $1,400.

• Due Date:  Payable monthly on the 20th day of the following month.

• Payment of the base royalty fee begins on the 20th day of the first full month after the Franchise Agreement is signed and begins the first month each additional center opens for additional centers.

• The 10% monthly royalty begins when you open your Center. The minimum royalty payment is due in the 24th month after your center opens.

• Mathnasium presently provides a royalty rebate for its top performers of 2% on royalties paid on monthly gross receipts. For a franchisee to qualify for this rebate, all centers owned by that franchisee must be operating under Franchise Agreements dated April 2010 or later. For a franchisee to qualify for the rebate for a given month, the franchisee’s total combined monthly revenues must rank in the top 8% of all such combined revenues for all U.S based Mathnasium franchisees (in addition to being in full compliance with Mathnasium’s operating systems).

• Mathnasium also presently provides a royalty fee rebate during the first year after an existing franchisee acquires an existing center from the previous owner of 100% of the monthly royalty fee for the first 3 months, 75% of the monthly royalty fee for the next 3 months, 50% of the monthly royalty fee for the next 3 months, and 25% of the monthly royalty fee for the last 3 months.

• Royalty rebate policies are reviewed annually and Mathnasium may change or terminate them at any time.

• “Gross Receipts” are defined as the total of all receipts (all money or things of value received) derived from all sources in connection with the operation of the Center, including, without limitation, student tuition, registration and testing fees, sales of learning materials, hourly per student private tutoring, and any other products or services provided in connection with the operation of the center or which are promoted or sold under or using the Marks, and without deducting your costs or expenses, salaries, overrides, or bonuses payable to your employees or independent tutors.

• “Gross Receipts” shall exclude only sales tax receipts that you must by law collect from customers and that you pay to the government, customer refunds actually paid, and coupons or promotional discounts approved by Mathansium.

3.  Monthly Marketing Fee:  $250, plus 2% of your monthly gross receipts from all sources as a result of operating your center

• Due Date:  Payable monthly on the 20th day of the following month.

• The marketing fee for franchise operators who became Mathnasium franchisees on or prior to March 4, 2013 is 2% of monthly gross receipts.

4.  Technology License Fee:  currently $110 per month per center, subject to increase

• Due Date:  Payable monthly on the 20th day of the following month.

• For each center, payable on the 20th day of the next month after the month in which you execute the Franchise Agreement.

• You must use Mathnasium’s centralized computer system for business management at your center. Mathnasium has invested in and currently uses a proprietary technology system built on a platform licensed from Salesforce.com, Inc. which is subject to ongoing development by outside vendors.

• Contracts between Mathnasium, LLC, Salesforce.com, Inc., and outside vendors provide discounted licenses to franchisees for access to and use of the system, as well as ongoing improvements and modifications.

• Mathnasium also pays storage costs for the data produced by franchisees’ operations of their software.

• As of the date of the 2016 disclosure document, the technology fee charged by Mathnasium to franchisees to cover these costs is $110 per center per month.

• These fees currently cover the cost of the 1 license and storage requirements for your first center, but may be used by Mathnasium to cover any technology-related costs. Additional centers require payment of 1 additional monthly technology fee each.

• Mathansium reserves the right to change the centralized computer system at any time and to use the technology fees paid by you to pay for the licensing fees of another technology platform, to develop its own platform, or to cover any other technology-related costs.

5.  Annual Convention Fee:  currently $250 per franchisee per center

• Due Date:  Payable annually, generally in May.

• This fee is charged to partially defray Mathnasium’s costs of holding an Annual Convention. The fee covers attendance for up to two people for your first center and one additional person per additional center. Additional attendees will be charged an additional fee of $100 per person.

• Starting with the 2018 convention, Mathnasium will charge $200 per center, which will cover attendance for one person only. Additional attendees will be charged an additional fee of $200 per person.

• Attendance is required. Even if you are unable to attend a particular annual convention, the annual convention fee charged to you that year is not refundable.

6.  Administrative Fee for Late Payment:  $100 every 2 weeks until payment is made

• Due Date:  Beginning on the 5th day after payment is due and every 2 weeks thereafter.

• Payable if you are 5 days late on payments due to Mathnasium.

7.  Administrative Fee for Late Submission of Reports:  $100 every two weeks until reports submitted

• Due Date:  21st day of the month following the month covered by the reports and every week thereafter.

• Payable if you are 1 day late in submitting reports.

8.  Non-Compliance:  $300 per month for each non-complying incident

• Due Date:  30 days following receipt of written notice.

• Applies if you fail to make changes requested in a written notice.

9.  Returned Check Service Charge:  $60 per check returned by bank for non-sufficient funds

• Due Date:  When requested by Mathnasium.

• Charge covers Mathnasium’s costs for re-depositing the check.

10.  Shipping Costs:  actual cost of shipping only

• Due Date:  When incurred.

11.  Payments for “Chargeable Items” Purchased from Mathnasium:  prices determined by Mathnasium

• Due Date:  As stated on invoice.

• Mathnasium may offer supplemental teaching materials or promotional items for your use or sale which you may, at your option, purchase. These are called “Chargeable Items.”

12.  Transfer Fee:  $6,000

• Due Date:  On approval of transfer.

• Payable if you transfer your franchise.

13.  Training Fee:  $1,500

• Due Date:  Before training begins.

• This fee is only paid by a transferee who is purchasing an existing and operating Mathnasium center.

• This fee is nonrefundable and covers the initial training and apprenticeship training program.

• Transferees who purchase an existing and operating Mathnasium center are required to pay Mathnasium a nonrefundable training fee of $1,500 prior to attending training.

• This fee covers the costs of the initial training and apprenticeship program, but does not cover the costs of your hotel rooms or any other incidental costs you may incur in connection with attending the initial training and apprenticeship program.

14.  Initial Training Program Tuition for Additional Trainees:  $750 per person

• Due Date:  Before training begins.

• Payable if more than 2 individuals will attend the same initial training program.

15.  Initial Training Program for Additional Sessions:  $1,500 for up to 2 people

• Due Date:  Before training begins.

• Payable if more than 1 initial training program is requested.

16.  Additional Marketing Assessment:  pro rata amount to cover special advertising program

• Due Date:  When incurred.

• Determined by a majority vote of all franchised centers (one vote per center).

17.  Local or Regional Cooperative Advertising:  as determined by cooperative. All money spent on cooperative advertising will be a credit against the local advertising requirement.

• Due Date:  Determined by cooperative.

• Mathnasium may designate cooperatives of 2 or more centers. Company-owned or affiliate-owned centers will participate in cooperatives and will have one vote per center.

18.  Reimbursement of Taxes:  actual amount of taxes assessed against Mathnasium due to your operation of your center

• Due Date:  Upon demand.

• Payable if your state imposes such a tax on Mathnasium.

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