Considering a Smoothie King Franchise? Don’t Overlook These 32 Important Franchise Fees

If you are considering a Smoothie King franchise, don’t get blindsided by these 32 important franchise fees (from the initial franchise fee, to the royalty fee, to 30 other fees found in Items 5 and 6 of Smoothie King’s 2016 FDD).

• All fees are payable to Smoothie King and apply to the Franchise Agreement. The fees are nonrefundable and are uniformly imposed unless otherwise noted.

• During the term of the Franchise Agreement, Smoothie King may offer optional services not currently contemplated for which Smoothie King may charge a fee.

• All fees apply to both Traditional and Non-Traditional locations unless otherwise noted.

1.  Initial Franchise Fee – Traditional Location:  $20,000 to $30,000

• You will pay a $30,000 lump sum initial franchise fee when you sign the Franchise Agreement.

• If you are an existing franchisee in good standing and meet Smoothie King’s qualifications, Smoothie King may approve you to develop an additional Unit.

• If you are an existing franchisee in good standing and meet Smoothie King’s qualifications:

• 1.  If you are purchasing your fourth, fifth, and sixth Unit, Smoothie King will offer you a reduced initial franchise fee equal to $25,000; and

• 2. If you are purchasing your seventh or subsequent Unit, Smoothie King will offer you a reduced initial franchise fee equal to $20,000.

• Smoothie King is a member of the International Franchise Association’s VetFran program. If you are an active member of the United States Armed Forces or if you have been honorably discharged from the United States Armed Forces, you will be eligible for a discount of 20% off the initial franchise fee.

2.  Initial Franchise Fee – Non-Traditional Location:  $15,000

• You will pay a lump sum initial franchise fee of $15,000 when you sign the Franchise Agreement for a Non-Traditional location. The initial franchise fee is not refundable under any circumstances.

3.  Development Fee:  $15,000 for each Unit that you are authorized to develop after the first franchise

• You will pay a lump sum development fee when you sign the Development Agreement.

• The development fee is calculated at the rate of $15,000 for each Unit that you are authorized to develop after the first franchise. For example, if you enter into a Development Agreement to establish your first Unit and an additional four Units, your development fee will be $60,000.

• Development fees will be applied to the franchise fees for each Unit opened under your Development Agreement.

• The development fee is not refundable under any circumstances.

• In addition to the development fee, you must sign a Franchise Agreement and pay the initial franchise fee for your first Unit at the same time you sign the Development Agreement unless you are a current Smoothie King franchisee.

• If you are a current Smoothie King franchisee, you must sign a Franchise Agreement and pay the initial franchise fee at least four months before your Unit is scheduled to open or before the beginning of the site selection process, whichever occurs first.

• Under the Development Agreement, the initial franchise fee for the first, second, and third Unit is $30,000. The initial franchise fee for the fourth, fifth, and sixth Unit is $25,000; and the initial franchise fee for the seventh Unit and each subsequent Unit is $20,000.

• Each initial franchise fee under the Development Agreement is for a Traditional location; the right to develop Units under a Development Agreement does not include Non-Traditional locations unless specifically agreed upon in writing by Smoothie King.

4.  Other Initial Fees Before the Smoothie King Business Opens

• In addition to the initial franchise fee and, if applicable, the deposit described above, you must pay Smoothie King up to $2,500 for design fees for your Unit premises.

• Also, if you request more than one site evaluation, you must reimburse Smoothie King for its reasonable actual expenses in conducting the evaluation, and you may need to pay it for an impact study (ranging from $4,000 to $6,000) if your proposed site may impact sales of another existing Unit.

• These fees are not refundable under any circumstances.

• Regardless of whether you operate your Unit at a Traditional or Non-Traditional location, you must pay Smoothie King’s approved suppliers $5,000 to be spent on grand opening advertising.

• You must pay $2,500 to Smoothie King on the earlier of (i) the date you begin the initial training programs or (ii) the date on which Smoothie King scheduled the opening of the Unit. Those funds shall pay expenses associated with approved grand opening advertising, marketing, or promotional activities in your general market area.

• The $2,500 payment to Smoothie King will be reimbursed when you submit receipts showing $5,000 total grand opening advertising spending to your Field Marketing Manager within 120 days of the opening date. Reimbursement of the $2,500 payment requires a single report of all expenditures adding up to $5,000 or more; requests for reimbursement that show less than $5,000 total spending will not be accepted.

• If a request for reimbursement is not received within 120 days of opening, then the $2,500 payment to Smoothie King goes to the Regional Marketing Fund for the area where the store is located, or to the National Marketing Fund if the store is not in an area covered by a Regional Marketing Fund.

5.  Operating Fee:  4% to 6% of Gross Sales, subject to a monthly minimum fee of $500 beginning with the 16th month after the effective date of your Franchise Agreement

• Due Date:  Accounting paperwork due within 6 days after the end of each month; payment due by the 16th of each month for the prior month’s fees.

• Gross Sales is defined as all products and services sold in or from the Unit. This includes concessions off premises, catering, and delivery. Gross Sales do not include any excise or sales tax. In the past, Smoothie King has reduced or waived the royalty fee for certain locations.

• Subject to the following, upon the earlier of (i) you opening and operating the Unit and (ii) the beginning of the 16th full calendar month after the effective date of your Franchise Agreement, you will pay Smoothie King an Operating Fee equal to the greater of $500 each calendar month or 6% of Gross Sales.

• If you (directly or through an entity under “common control” with you) operate more than 10 Units, the Operating Fee will be the greater of $500 each calendar month or 6% of Gross Sales for each of the first through 10th Unit you opened and currently operate, the greater of $500 each calendar month or 5% of Gross Sales for the 11th through 20th Unit you opened and currently operate, and the greater of $500 each calendar month or 4% of Gross Sales for the 21st and each additional Unit you opened and currently operate.

• The Operating Fee paid for any particular Unit will be determined by the date on which the Unit opened. For example, if you operate 11 Units, you must pay Smoothie King a 6% Operating Fee on the Gross Sales for each of the first 10 Units opened and a 5% Operating Fee on the 11th Unit opened (subject to the minimum monthly operating fee).

• If at any time you close or sell a Unit that would result in an Operating Fee rate change, the change in the Operating Fee will be effective for the next full monthly reporting period for the Unit. For example, if you operate 11 Units and you sell one of those Units that is paying a 6% Operating Fee on March 15th, you will pay Smoothie King a 6% Operating Fee on the Gross Sales for the 11th Unit commencing with Gross Sales recorded for the April reporting period (subject to the minimum monthly operating fee).

• An entity is deemed under “common control” with you if the entity is at least 80% owned by the same individual(s) or entity who owns you.

6.  National Marketing Fee:  currently 2% of Gross Sales; Smoothie King has the right to increase the Fee to 5% of Gross Sales upon 60 days’ notice

• Due Date:  Same as Operating Fee.

• You must pay Smoothie King the National Marketing Fee, beginning on the date you open for business.

• The National Marketing Fee is currently 2% of monthly Gross Sales. Smoothie King may increase the National Marketing Fee up to 5% of monthly Gross Sales with 60 days’ notice.

• Smoothie King does not charge a marketing and promotional fee for Units located in airports, but these Units do not receive the promotional materials paid for by the National Marketing Fund.

7.  Regional Marketing Fee:  if established in a region where the Unit is located, Smoothie King will determine the amount of the Fee, not to exceed 2% of Gross Sales

• Due Date:  Same as Operating Fee.

• Any contribution to the Regional Marketing Fund will be credited to your local marketing requirement.

• You will not be required to contribute to both a Regional Marketing Fund and Cooperative.

8.  Local Marking Cooperative Contribution:  if established in an area where the Unit is located, Smoothie King will determine the amount of the Fee, not to exceed 2% of Gross Sales

• Due Date:  Monthly or as per the Cooperative By-Laws.

• Any contribution to the Cooperative will be credited to your local marketing requirement.

• You must spend, on an annual basis, a minimum of 2% of annual Gross Sales on local advertising and marketing.

• Except for Non-Traditional locations, Smoothie King may require you to pay all or any part of the local advertising and marketing fee to a Cooperative or a Regional Marketing Fund if one is established in your area.

• You will not be required to contribute to both a Regional Marketing Fund and a Cooperative.

9.  Local Marketing Requirements:  minimum of 2% of Gross Sales

• Due Date:  As incurred.

• Any contribution to a Regional Marketing Fund or a Cooperative will be credited towards your local marketing requirement.

10.  Grand Opening Advertising:  minimum of $5,000 for all locations

• Due Date:  Paid when the franchisee of any new, relocated, or transferred Unit comes for initial management training or by the scheduled Unit opening date, whichever is earlier.

• You must pay $2,500 to Smoothie King on the due date, which amount will be reimbursed to you upon submitting to Smoothie King a single report of all expenditures (adding up to $5,000 or more) within 120 days of opening.

• Otherwise, the $2,500 payment is not reimbursed and will go to a marketing fund.

11.  Site Application and Evaluation:  no charge for first evaluation. After first evaluation, Smoothie King’s costs plus $4,000 to $6,000 for an impact study, if necessary.

• Due Date:  As incurred.

• After first evaluation, you will reimburse Smoothie King for its reasonable actual expenses incurred in conducting the evaluation.

• You may be required to pay for an impact study if your proposed site may affect sales of another Smoothie King business.

12.  Interest on Late Payments:  18% per annum or maximum rate allowed by law, if less than 18%

• Due Date:  After the date payments are overdue.

13.  Training Fees:  no charge for initial training programs for the first two trainees; between $200 and $1,000 for each additional trainee

• Due Date:  As incurred.

• After the initial training program, Smoothie King may require you to pay Smoothie King a reasonable fee for other personnel to attend the same, or other, training programs.

• The current fees are $1,000 per person for additional initial management training and $200 per person for regional training.

• You must pay all personal expenses you and/or your team members incur to attend training programs, including costs and expenses of transportation, lodging, meals, wages, and employee benefits.

• Smoothie King reserves the right to charge reasonable fees for materials and participation in any training courses or seminars, but Smoothie King will not charge for the attendance by up to two persons representing you at the initial franchise management training program.

14.  Remodel Costs:  5 years:  $0-$15,000 for materials; transfer:  $0-$10,000 for materials; renewal:  $40,000-$75,000 for materials

• Due Date:  After 5 years from date the Franchised Business opens for operation, upon transfer of Unit, or upon renewal.

• These amounts are for materials only. Labor costs will vary based on where you are located.

• If a transfer occurs at the time a mid-term or renewal upgrade is due, those upgrade costs shall apply.

15.  Late Remodel Fee:  $500 per month for each month after required to remodel

• Due Date:  As incurred.

• If you fail to remodel when required, Smoothie King may charge you a late fee.

16.  Audit Fees:  audit discrepancies and reasonable actual costs of conducting audit

• Due Date:  After audit and audit costs if gross sales are understated by 2% or more.

17.  Transfer Fees – Franchise Agreement:  30% to 50% of the then-current initial franchise fee; Transfer Fees – Development Agreement:  10% to 20% of the then-current initial franchise fee

• Due Date:  Prior to closing.

• Transfer Fees may be reduced under certain circumstances (e.g., Smoothie King will consider a reduced fee for transfers to immediate family members).

• The amount of the transfer fee depends upon whether you are transferring your interest to a current Smoothie King Business manager, franchisee, or developer and whether the transfer will require a new location for the Business.

18.  Securities Offering Fee – Franchise and Development Agreement:  up to $5,000

• Due Date:  Upon your review of Securities Offering.

19.  Supplier Approval Fee:  actual costs of inspection and testing

• Due Date:  Upon inspection and testing of products.

• Incurred if you desire to purchase any items from an unapproved supplier.

20.  Monthly Financial Report Deviation Fee:  maximum of $20 per hour

• Due Date:  As incurred.

• Incurred if Smoothie King must correct your financial reports because they do not meet its designated form.

21.  Legal Fees/Arbitration Costs – Franchise and Development Agreement:  reasonable expenses associated with enforcement of agreements

• Due Date:  Upon conclusion of legal proceedings.

22.  Design Documents for New and Relocated Units:  up to $2,500

• Paid to Smoothie King.

23.  NSF Checks or Draft:  $50 for first occurrence; $75 for each occurrence thereafter

• Due Date:  As incurred.

• Smoothie King may change this fee on notice, in order to reflect its additional costs.

24.  Product and Service Purchases:  varies

• Due Date:  As incurred.

25.  Extra Operational and Marketing Support, Including Visits to Cure Operational Issues – Franchise and Development Agreement:  reimbursement of reasonable actual expenses

• Due Date:  As incurred.

26.  Replacement Fee for Manuals:  $2,500 for Recipe Manuals/Books/Panels. $500 for each other Manual.

• Due Date:  Before replacement of Manual for loss, theft, or destruction.

27.  Technology Fee:  reasonable monthly fee; currently $200 per month

• Due Date:  This fee is paid monthly at the same time you pay the operating fee.

• Smoothie King may change this fee on notice, in order to reflect its additional costs.

• For computer software support and other technical services provided by Smoothie King or its designee.

28.  Relocation Fee:  up to $500 (site package and plans may be an additional charge)

• Due Date:  As incurred.

29.  Renewal Fee:  $5,000

• Due Date:  30 days before renewal. Currently not charged.

30.  Monthly Package Reporting Late Fee:  $25 to $300

• Due Date:  As incurred.

• Incurred if you are late in sending in the required monthly paperwork package.

31.  Late Income Portion of Paperwork Fee:  $50 or as Smoothie King adjusts from time to time

• Due Date:  As incurred.

32.  Resale Assistance Fee:  Greater of $10,000 or 10%, plus any advertising costs

• Due Date:  As incurred.

• From time to time, Smoothie King may offer this optional program. If the program is chosen, offered, you (as the franchisee) and the prospective purchaser meet Smoothie King’s then-current qualifications, and you agree to follow all specified guidelines, Smoothie King will assist in the sale of the Unit and collect the greater of $10,000 or 10% of the purchase price.

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