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Considering a Pandora Franchise? Don’t Overlook These 14 Important Franchise Fees

by Franchise Chatter on November 29, 2016

in Franchise Fees, Jewelry Store Franchise, Retail Franchise

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

Pandora Jewelry Customer Photo by Fiona McKean Photography

This post was updated on September 11, 2017 to reflect information from Pandora’s 2017 FDD.

If you are considering a Pandora franchise, don’t get blindsided by these 14 important franchise fees (from the initial franchise fee, to the royalty fee, to 12 other fees found in Items 5 and 6 of Pandora’s 2017 FDD).

Except where otherwise noted, all fees are uniformly imposed, payable to Pandora, and are not refundable.

1.  Initial Franchise Fee:  $0

  • You do not currently pay Pandora any initial franchise fee.

2.  Initial Inventory:  $350,000 to $550,000

  • You must purchase your entire inventory of jewelry from Pandora. The initial inventory will cost between $350,000 and $550,000.
  • In very limited situations, Pandora may finance the initial inventory up to 12 months (generally 30 to 90 days).
  • Subject to applicable law, upon termination or expiration of the Franchise Agreement, Pandora has the option to repurchase from you, but is not contractually required to do so, all unsold inventory items at a price equal to the dollar amount paid by you to acquire such items.
  • If Pandora elects not to repurchase your unsold inventory items upon termination or expiration of your franchise, it may permit you to sell such inventory to an existing Pandora franchisee.

3.  Fixtures:  $53,000 to $115,000

  • You must purchase all of the fixtures for your Store from Pandora, at a cost of $53,000 to $115,000.

4.  Display Accessories:  $2,000 to $6,000

  • You also must pay to Pandora an amount of $2,000 to $6,000 for display accessories necessary for the Store.
  • The above-described payments are the only payments you must make to Pandora or any affiliate for services or goods provided before your Pandora Store begins operating.
  • During Pandora’s fiscal year ending December 31, 2016, Pandora collected from franchisees amounts ranging from $102,715 to $1,567,520 for the payments referenced in Item 5 (i.e. numbers 1 to 4 above)
  • There are currently no initial development fees or similar fees payable under the Multi-Unit Development Agreement.

5.  Local Advertising Expenditures:  4% of Gross Sales annually, although Pandora may increase this fee to a maximum of 6% of Gross Sales on 90 days’ prior notice to you

  • Due Date:  As arranged.
  • “Gross Sales” means all revenues and income from any source derived or received by you from, through, by, or on account of the operation of your Store whether received in cash, in services, in kind, from barter and/or exchange, on credit (whether or not payment is actually received), or otherwise, less the amount of any documented refunds given in good faith to customers by you, and sales tax receipts or similar tax receipts if separately stated when the customer is charged and actually paid to the appropriate taxing authority.
  • All local advertising must be approved by Pandora.
  • You will pay local advertising costs as arranged with vendors.
  • Pandora reserves the right to designate local or regional advertising cooperatives and require you to participate and contribute.
  • Your contributions to cooperative advertising or promotional programs will be credited toward the minimum local advertising expenditures.
  • Pandora will establish and notify you of an amount of advertising which is your “Co-op Eligibility Amount.” When spent by you on eligible advertising and promotional expenses, you will receive a merchandise credit equal to one-half of the amount you spend, up to your Co-op Eligibility Amount.
  • You are required to spend on advertising and other promotions an amount equal to 100% of your Co-op Eligibility Amount. All amounts spent towards your Co-op Eligibility Amount will count towards your local marketing requirement.

6.  Marketing Fund Fee:  an amount not to exceed 3% of monthly Gross Sales

  • Due Date:  As Pandora specifies in the Manual.
  • You must currently contribute 1.5% of your monthly Gross Sales to the Marketing Fund. Pandora reserves the right to increase the amount you must pay to the Marketing Fund up to 3% of your monthly Gross Sales upon 30 days’ prior notice to you.

7.  Transfer Fee:  $2,000

  • Due Date:  At time of transfer.

8.  Interest Expenses; Late Fee:  interest may not exceed 18% per annum; $50 late fee

  • Due Date:  Upon billing.
  • All amounts owed to Pandora will bear interest at the highest legal rate for open account business credit in the state in which your Territory is located, which may not exceed 18% per annum.
  • In addition to interest charges, you must pay Pandora a service charge of $50 for each delinquent report or payment.

9.  Indemnification:  variable

  • Due Date:  Upon demand.
  • You pay Pandora for third-party claims arising out of the operation of your Store.

10.  Costs and Attorneys’ Fees:  variable

  • Due Date:  Upon demand.
  • Payable under the Franchise Agreement only if you and Pandora become involved in an action or proceeding, and Pandora prevails.
  • Payable under the promissory note if Pandora must undertake collection efforts if the note is not paid when due.

11.  Renewal Fee:  Pandora’s then-current renewal fee, not to exceed $5,000

  • Due Date:  Before the date of renewal.
  • Pandora does not currently charge a renewal fee.
  • This fee is payable only if you renew your franchise rights and Pandora charges a renewal fee at the time you seek to renew.

12.  Supplier Review Fee:  Pandora’s actual costs and expenses, not to exceed $300 per day

  • Due Date:  Upon demand.
  • Payable if, after receipt of your written request, Pandora reviews an alternate supplier or product for use in your Store.

13.  Remodeling Costs:  $156,400 to $383,400

  • Due Date:  Depends on lease term; due at year 5 on 5-year lease; lease renewal on 7- and 8-year leases; year 5 and lease renewal on 10-year leases.
  • This estimate includes costs of fixtures, flooring, lighting, signage, construction, and related costs necessary to bring your store up to Pandora’s then-current standards for new stores.

14.  Reimbursement for Insurance Premiums:  variable

  • Due Date:  Upon demand.
  • Payable if you fail to obtain required insurance and Pandora chooses to obtain it on your behalf.
  • You must maintain in force at all times during the term of your Franchise Agreement all insurance types and limit amounts as Pandora specifies from time to time with an insurance carrier that it designates. Currently, Pandora has designated Jeweler’s Mutual Insurance Co. as the carrier from whom you must purchase your insurance, unless Pandora approves otherwise in writing.
  • Currently, Pandora requires you to carry comprehensive general liability insurance, the limits of which may not be less than $1,000,000 single limit for bodily injury, personal injury, and property damage combined, or any other amount Pandora may specify if it deems it necessary; casualty insurance; and other insurance it designates.
  • In addition, you must procure and maintain a $2,000,000 umbrella policy covering your Store and business operations.
  • Pandora must be named as an additional named insured on all policies of insurance, and such polices must provide that Pandora be notified in writing at least 30 days prior to the cancellation or other material change of such policies.
  • You must furnish to Pandora, immediately upon receipt, duly executed copies of all insurance policies and renewal notices and notices of changes in coverage, and must be solely responsible for the entire cost of such insurance.
  • If you fail to obtain the specified insurance, Pandora may obtain such insurance and charge the premiums and any other related expenses to you, which you must promptly pay.
  • The cost of insurance varies depending on your locale and accident record. The estimated cost of insurance for Pandora franchisees for the first year, however, ranges from $4,000 to $7,000 per year. For subsequent years, the cost may vary depending on your insurance carrier, Gross Sales, and workers’ salaries.
  • You must also carry Worker’s Compensation insurance at statutory limits. Worker’s Compensation insurance is calculated as a percentage of workers’ salaries or Gross Sales, depending on the insurance carrier and it varies significantly from state to state.
  • You must also carry Jeweler’s Block insurance and any other insurance that may be required by law or by your lease.

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