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Considering a Tom and Chee Franchise? Don’t Overlook These 23 Important Franchise Fees

by Franchise Chatter on November 30, 2016

in Franchise Fees, Sandwich Franchise



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

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If you are considering a Tom and Chee franchise, don’t get blindsided by these 23 important franchise fees (from the initial franchise fee, to the royalty fee, to 21 other fees found in Items 5 and 6 of Tom and Chee’s 2016 FDD).

  • All fees are imposed by and payable to Tom and Chee unless otherwise specified. All fees are nonrefundable. All fees are uniformly imposed.

1.  Initial Franchise Fee:  $40,000

  • You are required to pay Tom and Chee an Initial Franchise Fee of $40,000.
  • The Initial Franchise Fee is paid in consideration of Tom and Chee’s sales expenses, administrative overhead, return on investment and start-up costs related to the execution of the Franchise Agreement and the opening of the franchise, and for its lost or deferred opportunity to sell franchises in the Franchise Territory to others.
  • Simultaneous with the execution of the Franchise Agreement, you will pay Tom and Chee the entire Initial Franchise Fee. Tom and Chee does not finance any portion of the Initial Franchise Fee.

2.  Area Development for Multiple Franchise Purchases:  the entire Initial Franchise Fee for the first franchise and one-half of the Initial Franchise Fee for each additional franchise

  • If you desire to open more than one franchise and meet Tom and Chee’s criteria, then you may simultaneously sign an Area Development Agreement. You will be required to sign the then-current form of the Franchise Agreement as the additional stores are opened for business.
  • According to the Area Development Agreement, you receive the right to develop a specified number of franchises within the Development Area.
  • The Initial Franchise Fee for multiple franchises is $40,000 for the first franchise and $25,000 for each additional franchise.
  • When you sign the Area Development Agreement, you must pay Tom and Chee the entire Initial Franchise Fee for the first franchise and one-half of the Initial Franchise Fee for each additional franchise. The remaining half of the Initial Franchisee Fee for each additional franchise is paid to Tom and Chee when you sign the Franchise Agreement for each respective franchise.
  • If you enter into an Area Development Agreement, you will be required to purchase pre-opening services and goods prior to your opening each Tom and Chee restaurant. You will be responsible for paying all other fees required under the applicable Franchise Agreements as provided in those agreements.
  • Tom and Chee intends to raise the Initial Franchise Fee after certain growth levels have been attained. The increased franchise fee and timing have not been determined as of this date.
  • Tom and Chee may offer franchises at a reduced rate to prospective franchisees who in its opinion possess the knowledge and experience to conduct business with minimal assistance from it or who are purchasing multiple franchises. Occasionally, Tom and Chee may grant new franchises to its owners and employees and their family members with reduced or no initial fees.

3.  Royalty Fee:  6% of your weekly Gross Revenue



  • Due Date:  Payable weekly by the first business day immediately following each seven-day period of Monday through Sunday.
  • “Revenue” means all receipts generated by the franchise from any source including sales, exchanges, services, labor, service charges, etc. Credit sales shall be calculated as of the date of sale without deduction for uncollected credit accounts.
  • “Revenue” shall not include bona fide credits for returns of merchandise, promotional discounts, or the amounts collected and paid to appropriate governmental authorities under the provisions of any Sales Tax, Retailer’s Occupation, or similar Act.
  • “Gross Revenue” means your total Revenue for each seven-day period (or other specified period).
  • You will deliver to Tom and Chee, as outlined in the Operations Manual, an itemized report of your Gross Revenue for the preceding seven-day period. The report must be in the form Tom and Chee designates. All Royalty Fee and Advertising Fee payments based upon the Gross Revenue for the preceding seven-day period must be submitted with the report.
  • You must pay any taxes imposed as a result of your payment to Tom and Chee of initial or ongoing fees.
  • Tom and Chee may require you to make fee payments by automatic account withdrawal or other automatic processes it reasonably specifies in the Operations Manual, such as check, cash, certified check, money order, credit or debit card, automatic pre-authorized payment plan, electronic funds transfer, or the Internet.

4.  Advertising Fee:  1.5% of your weekly Gross Revenue

  • Due Date:  Payable weekly by the first business day immediately following each seven-day period of Monday through Sunday.
  • This fee may be payable through automatic debit processes or other methods as outlined in the Operations Manual.
  • Tom and Chee reserves the right to temporarily lower, suspend, or rebate the Advertising Fee at any time, upon prior written notice to you and to its other franchisees.
  • However, as of the date of the 2016 Disclosure Document, new franchisees will be required to sign an Addendum to Franchise Agreement (Ad Fees; Local Marketing) that provides that, until there are 100 or more Tom and Chee restaurants in operation, the franchisee will pay to Tom and Chee an Advertising Fee equal to 0.5% of Gross Revenue and will expend in its local market at least 1% of its Gross Revenue (the “Supplemental Local Advertising Requirement”) to advertise and promote its franchise (in addition to the normal 1.5% Local Advertising Requirement described below).
  • After Tom and Chee gives notice to you that there are 100 or more Tom and Chee restaurants open, then the advertising fee requirements will revert to the 1.5% Advertising Fee paid to it and the normal 1.5% Local Advertising Requirement, but without the 1% Supplemental Local Advertising Requirement.
  • Advertising Fee payments are in addition to and exclusive of any sums that you may decide or be required to spend on local advertising and promotion.
  • Tom and Chee has sole discretion over the creative ideas, materials, endorsements, media, placement, and allocation of monies related to use of the Advertising Fee.
  • The Advertising Fee is used to maintain, administer, direct, prepare, and review national, regional, and local advertising materials and programs and to cover Tom and Chee’s related overhead as it, in its sole discretion, deems necessary.
  • Tom and Chee is under no obligation to administer the Advertising Fee to ensure that expenditures are proportionate to contributions of its franchisees for any given market area or that any franchise benefits directly or proportionately from the development or placement of advertising. Tom and Chee is not obligated to expend all or any part of the Advertising Fee during any specific time.
  • Tom and Chee will have the right to expend all, or any portion of, the Advertising Fees collected for the creation of co-op advertising programs.

5.  Local Advertising Requirement:  you must spend at least 1.5% of your annual Gross Revenue on your local advertising

  • Due Date:  As Incurred.
  • This amount is not a fee. It is spent by you on local advertising.
  • You must maintain a business phone and maintain listings in the local telephone directory under the listings Tom and Chee may designate. This business listing must meet the content requirements outlined in the Operations Manual.
  • Tom and Chee may require you to prove that you have paid the required local advertising expenditures.

6.  Regional Advertising Payment:  as determined by 75% of franchisees in the region, up to 2% of Gross Revenue

  • Due Date:  As determined by franchisees in the region.
  • Regional advertising payments are credited against your Local Advertising Requirements.

7.  Audit Fees:  all audit costs if franchisee understates Gross Revenues by more than 2%

  • Due Date:  Immediately after notice.
  • Tom and Chee may audit your reports, books, statements, business records, cash control devices, and tax returns at any time during normal business hours.
  • Audits will be conducted at Tom and Chee’s expense unless you understate the Gross Revenue for any reported period or periods by more than 2 percent, or unless you fail to deliver any required report of Gross Revenue or any required financial statement in a timely manner.
  • In the event of an understatement or failure to deliver, you will reimburse Tom and Chees for all audit costs. These will include, among other things, the charges of any independent accountant and the travel expenses, room, board, and compensation of Tom and Chee’s employees incurred in connection with the audit.
  • You will immediately pay all Royalty Fees, Advertising Fees, Local Advertising Contributions, and late payment charges that the audit determines are owed. These payments will not prejudice any other remedies Tom and Chee may have under the Franchise Agreement or by law.

8.  Additional Training:  reasonable training fee at Tom and Chee’s current rates. Also, you must reimburse Tom and Chee for its reasonable out of pocket costs (travel, accommodations, etc.).

  • Due Date:  Before opening or after you open your franchise for business.
  • You must give Tom and Chee not less than 35 days’ prior written notice of your desire to receive additional training.
  • The duration of training is negotiable depending upon your needs.
  • You will not receive any compensation for services rendered by the trainee during this or any other training.
  • Tom and Chee may designate qualified franchisees to conduct some or all of your training.
  • “Additional Training” means training beyond the usual initial training period in the length of time of the training, refresher training, and other later training after the initial training and, in some cases, could mean training of more operating personnel beyond the usual number of 4 people.
  • Whether training will be considered as “additional training” will also often depend on where the training takes place; training at the franchisee’s site is more likely to be classified as “additional training” than training at Tom and Chee’s usual Cincinnati area training sites.
  • Additional training would usually not include training of new managers at Tom and Chee’s usual training location.
  • The training fees will be based on Tom and Chee’s policies as established by it periodically. As of the date of the 2016 Disclosure Document, the training fee is $150 per trainer per day, plus a per diem charge for meals of $35 per trainer per day. In addition, the franchisee would be required to bear the trainers’ expenses for travel and lodging.

9.  Transfer Fee:  $10,000

  • Due Date:  Before transfer.

10.  Renewal:  $10,000

  • Due Date:  Prior to renewal.

11.  Relocation:  you will reimburse Tom and Chee for its reasonable out-of-pocket costs concerning the relocation

  • Due Date:  Before relocation.

12.  Late Charge:  1.5% per month

  • Due Date:  Each month that amounts owed remain unpaid.
  • You will not be compelled to pay late charges at a rate greater than the maximum allowed by applicable law.

13.  Temporary Management Assistance:  currently $300 per day plus Tom and Chee’s expenses



  • Due Date:  As incurred.
  • In case you request Temporary Management Assistance for any reason.

14.  Late Payment Penalty:  $10 per day from the date due until paid in full

  • Due Date:  As incurred.
  • You will not be compelled to pay late payment penalty in an amount greater than the maximum allowed by applicable law.

15.  Insufficient Funds Fee:  $50 for each unsatisfied attempt to draw royalty or advertising fees from your account

  • Due Date:  As incurred.

16.  Technology Fees:  $200 to $300 per month

  • Due Date:  Monthly.
  • Includes technology support for your point-of-sale system and software used for training and scheduling.

17.  Purchase of Products and Other Services:  varies

  • Due Date:  As incurred.

18.  Indemnification:  you will indemnify Tom and Chee from all claims, fines, attorneys’ fees, and damages arising out of your business activities.

  • Due Date:  On demand.

19.  Insurance Premiums:  if Tom and Chee buys insurance on your behalf, you are required to reimburse it, together with late charges, if applicable

  • Due Date:  Amounts are not yet determined.

20  Attorneys’ Fees:  (a) you will reimburse Tom and Chee for attorneys’ fees to collect or enforce your obligations under the Franchise Agreement or to defend against any claim because of your failure to perform; (b) in arbitration, bankruptcy, or litigation to enforce the Franchise Agreement, the prevailing party may recover arbitration costs, court costs, and reasonable attorneys’ fees

  • Due Date:  On demand.

21.  Leasing Counsel Fees:  $2,500 or more per lease; varies from one lease to another

  • Due Date:  As incurred.
  • Tom and Chee recommends that you use leasing counsel approved or designated by it to represent you in the negotiation of the lease (and lease addendum, if applicable) for your franchise premises.
  • Tom and Chee has designated leasing counsel who, as of the date of the 2016 Disclosure Document, has agreed to charge franchisees a fixed fee for the lease negotiations. As of the date of the 2016 Disclosure Document, the fixed fee is $2,500 per lease if the landlord uses the form of lease provided by Tom and Chee, or $3,500 per lease if the landlord uses its own form of lease and (as required) a lease addendum provided by Tom and Chee.
  • These fixed fees may change from time to time and the fees on any particular lease may be adjusted upwards in some cases in the event of unexpected difficulties.
  • Generally, Tom and Chee will ask leasing counsel to review the lease and (if applicable) lease addendum before it approves them. If you do not use leasing counsel designated by Tom and Chee for the negotiation of your lease and (if applicable) lease addendum, you are required to reimburse Tom and Chee for the costs it incurs for this review (including but not limited to fees for leasing counsel). Tom and Chee estimates that leasing counsel fees for this review may be around $1,000 per lease (but could be more or less).

22.  Other Lease Related Fees:  varies

  • Due Date:  As incurred.
  • Tom and Chee may require you to use a master broker designated or approved by it, as well as a local broker approved or designated by the master broker or Tom and Chee, to provide real estate brokerage services. You will be solely responsible for the commissions and other fees charged by these brokers.
  • Tom and Chee may require you to use an architect approved or designated by it for the design, improvement, and other services for your franchise premises. Charges for these architect services will be set by the architect.
  • Tom and Chee’s current requirements require you to use an architect designated by it for your first set of drawings (that is, schematic or conceptual drawings). Even if you use a different architect for construction drawings, you are required to provide the construction drawings to the architect designated by Tom and Chee for final review and approval before using them.

23.  Area Development Agreement Extension Fee:  currently $250 (which Tom and Chee may change) per extension or change

  • Due Date:  At or prior to time of grant of extension or change of development schedule.
  • If requested by you, Tom and Chee may in its discretion grant extensions or otherwise change the development schedule as it and you agree.


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