Considering a Menchie’s Franchise? Don’t Overlook These 22 Important Franchise Fees

Updated January 6, 2020.

If you are considering a Menchie’s franchise, don’t get blindsided by these 22 important franchise fees (from the initial franchise fee, to the royalty fee, to 20 other fees found in Items 5 and 6 of Menchie’s 2019 FDD).

You will pay all fees to Menchie’s unless otherwise noted. All fees are nonrefundable unless otherwise noted. All fees are uniformly imposed.

1.  Initial Franchise Fee:  $25,000 to $40,000

• The Initial Franchise Fee for a single Store franchise is $40,000, which will be paid in full at the time you sign the Franchise Agreement. The Initial Franchise Fee is earned upon receipt and except as noted below is nonrefundable.

• Within 30 days of the effective date of your first Franchise Agreement, you may choose to open additional Stores (a total of 3 Stores or 5 Stores, including the Store to be operated under your first Franchise Agreement), and receive the benefit of paying a reduced, per store Initial Franchise Fee (as described further below under “Development Fee”).

• If you choose to exercise this option, you will be required to pay Menchie’s the difference between the Initial Franchise Fee(s) you already paid and the balance owed for the additional Stores you agree to open, which will be calculated and paid as stated in Menchie’s then-current form of Area Development Agreement.

• You also will be required to sign an Area Development Agreement, or if you are already a party to an Area Development Agreement, an addendum to the Area Development Agreement identifying the additional Stores you agree to open.

2.  Uniforms, Merchandise, Equipment, and Supplies:  $800 to $1,000

• You will be required to purchase from Menchie’s uniforms, merchandise, equipment, and Store supplies costing approximately $800 to $1,000 for each Store you agree to open. This amount is earned upon receipt and is nonrefundable.

3.  Development Fee:  $96,000 to $125,000

• If you enter into an Area Development Agreement, the Initial Franchise Fee for each Store will depend on the number of Stores you agree to open. If you agree to open 3 Stores, the Initial Franchise Fee for each Store will be $32,000. If you agree to open 5 Stores, the Initial Franchise Fee for each Store will be $25,000.

• If you sign an Area Development Agreement, you must pay Menchie’s a “Development Fee” in an amount determined based upon the number of Stores you agree to develop and operate. If you agree to open 3 Stores, your Development Fee will be $96,000 ($32,000 x 3). If you agree to open 5 Stores, your Development Fee will be $125,000 ($25,000 x 5).

• The Development Fee is credited against the Initial Franchise Fee for each Store. The Development Fee is fully earned by Menchie’s upon receipt and is nonrefundable.

• Upon the signing of the Area Development Agreement, you will pay either:  (i) one-half of the total Development Fee; or (ii) the entire Development Fee.

• If you pay one-half of the total Development Fee upon the signing of the Area Development Agreement, a pro rata portion of such amount will be credited against the Initial Franchise Fee due for each Store that you agree to develop under your Area Development Agreement. The remaining balance of the Initial Franchise Fee for each Store will be due when you sign the Franchise Agreement for such Store. Under this option, you will develop and open each Store before beginning the development of your next Store.

• If you choose to pay the total Development Fee upon signing the Area Development Agreement, you also will sign a Franchise Agreement and an Addendum to Franchise Agreement for each Store you agree to open when you sign the Area Development Agreement. The Addendum to Franchise Agreement will modify the time you will have to develop and open each Store — 2 years if you agree to open 3 Stores, and 3 years if you agree to open 5 Stores.

4.  Royalty Fee:  the greater of $125 or 6% of Gross Sales

• Due Date:  Payable each week on Friday (based on Gross Sales of the previous week, Sunday to Saturday).

• Payments shall be made via electronic funds transfer (“EFT”).

5.  Marketing Fee:  2% of Gross Sales

• Due Date:  Payable each week on Friday.

• Payments shall be made via EFT.

6.  Audit Fee:  cost of audit

• Due Date:  5 days after notice of amount due.

• You will pay Menchie’s the costs of an audit if you fail to provide monthly financial statements in excess of 3 times per calendar year, or if a random audit shows an understatement of Gross Sales in excess of 2%.

7.  Late Fee:  10% of the amount due

• Due Date:  Within 5 days of the date of Menchie’s statement for amount due.

• If you fail to pay the Royalty Fee, Marketing Fee, or other amounts due to Menchie’s within 10 days of the due date.

• You also will be required to pay Menchie’s a late fee on any overdue amount beginning with the date payment is due until you pay the overage.

8.  Interest on Late Payments:  the lesser of 18% per annum or the maximum amount permitted by applicable law

• Due Date:  Within 5 days of the date of Menchie’s statement for amount due.

• You will pay Menchie’s interest on any overdue amounts beginning with the date payment is due until you pay the overage.

9.  Additional Training Fee:  to be determined by Menchie’s, but not to exceed $500 per person per day

• Due Date:  As incurred.

• You will pay Menchie’s a nonrefundable fee if you ask for special assistance or Menchie’s determines that additional training is warranted after your initial training period.

10.  Operations Manual:  $500

• Due Date:  As incurred.

• If your copy of the Operations Manual is lost, stolen, or otherwise unavailable to you.

11.  Alternative Supplier Evaluation Fees:  various amounts to be determined by the amount of time and money necessary to evaluate the alternative supplier and/or the alternative product

• Due Date:  As incurred.

• If you seek approval of a new supplier or product, Menchie’s may charge you a fee for conducting the evaluation or you may have to pay some third party to evaluate your proposed supplier or product.

12.  Renewal Fee:  10% of Menchie’s then-current Franchise Fee

• Due Date:  Before signing of the renewal Franchise Agreement.

• Payable to Menchie’s, if you wish to renew your Franchise Agreement.

13.  Technology Fee:  $80

• Due Date:  By the 1st day of each month, beginning 30 days after you sign a lease for your Store.

• You must pay Menchie’s, via EFT.

• The Technology Fee may change from time to time.

14.  Alternative Dispute Fee:  to be determined by the American Arbitration Association

• Due Date:  At commencement of dispute resolution.

• Fee for participating in any dispute-resolution process.

15.  Transfer Fee:  50% of Menchie’s then-current Franchise Fee

• Due Date:  Due at time transferee signs Franchise Agreement.

• Either you or transferee must pay Menchie’s the Transfer Fee.

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

• Due Date:  As incurred.

• Payable to Menchie’s, to reimburse it for fees incurred by it in obtaining injunctive or legal relief for the enforcement or defense of any item of the Franchise Agreement or for costs incurred for arbitration proceedings.

17.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Menchie’s if it is held liable for any claims arising from your business.

18.  Inspection Fee:  Menchie’s costs and expenses in conducting any subsequent pre-opening Store inspection. Menchie’s estimates that this amount will not exceed $1,500.

• Due Date:  Upon demand.

• Menchie’s will inspect your Store prior to opening. If your Store does not pass initial inspection, you will be charged for all costs and expenses Menchie’s incurs in conducting any subsequent inspections.

19.  Taxes:  actual costs

• Due Date:  Upon demand.

20.  Liquidated Damages:  $250 per day

• Due Date:  As incurred.

• Payable for each day unauthorized Menu Items, products, or services are offered for sale or sold.

21.  Termination Fee:  $250 per week for each week remaining in the Term of the Franchise Agreement if the Term of the Franchise Agreement had not been terminated early

• Due Date:  Upon demand.

• If you terminate the Franchise Agreement early or Menchie’s terminates the Franchise Agreement due to your uncured breach(es).

22.  Dispute Resolution Fees:  $50,000, plus attorneys’ fees and expenses

• Due Date:  Upon invoice.

• If you do not comply with Menchie’s dispute resolution requirements in the Franchise Agreement or the ADA.