19 Substantial Fees Every Kumon Franchisee Needs to Know About

Detailed Information on Kumon’s Initial Franchise Fee, Royalty Fee + 17 Other Fees (Items 5 and 6, 2023 FDD)

• All costs and fees set forth below are current as of the effective date of the current franchise disclosure document. However, Kumon reserves the right to increase or decrease, in its discretion, the amount of such costs and fees. The current amount of all costs and fees shall be set forth in the Kumon Operations Manual.

• Kumon imposes and collects all fees described in this table. Unless otherwise specified, all fees payable to Kumon are nonrefundable and are uniformly imposed on its franchisees.

1.  Initial Franchise Fee:  $2,000

• The Initial Franchise Fee is $2,000. You must pay the entire fee when you sign the Franchise Agreement. The Initial Franchise Fee is not refundable.

2.  Materials:  $1,000

• The initial fee for your purchase of materials you shall need to operate your Kumon Center, such as instruction answer books, student achievement tests, student placement tests, and promotional material, is $1,000.

• This fee will also apply if you are granted a second Center or you are taking over an existing Center.

• You must pay this entire fee when you sign the Franchise Agreement. This fee is not refundable.

3.  Deposit Fee:  $1,000

• If you are applying for your first Kumon Center franchise, the Deposit Fee is $1,000 for your Training Kit for the Instructor Development Program.

• Kumon will apply the Deposit Fee toward your Initial Franchise Fee if you successfully complete the Instructor Development Program and sign a Franchise Agreement.

• If either you or Kumon cancels the Training Agreement, at your expense, you must return to Kumon the Training Kit and all other material Kumon lent to you in connection with your participation in the Instructor Development Program. Kumon will return your deposit if it receives the training materials within 15 days after the notice of cancellation.

4.  Initial Enrollment Royalty Fee:  for each reporting month, $15 times the number of newly-enrolled students

5.  Monthly Royalty During Temporary License Period (“TLP”):  $40.50 times the number of full-payment students enrolled, and $20.25 times the number of partially exempt and/or prorated tuition students for each Subject-Franchise

6.  Monthly Royalty After Completing the TLP:  $36 times the number of full-paying students enrolled, and $18 times the number of partially exempt and/or prorated tuition students for each Subject-Franchise

• You must allow Kumon to make monthly electronic debits to your account equal to the amount you owe it.

• Due Date:  Through Electronic Funds Transfer (“EFT”), Kumon will debit your account each month. It currently debits franchisee accounts on the 17th or on the next business day, but it has the right to change that date in its discretion.

• If a student drops out of a Kumon Center and wants to return, the student can return without paying another Initial Enrollment Fee if the student returns within one reporting period (one calendar month). If the student returns after one reporting period, then the student must register again.

• If a student is enrolled in both Subjects, the student is required to re-enroll if he or she is absent for more than one month in both subjects concurrently.

• A $15 Initial Enrollment Royalty Fee is due each time a student registers, unless the student currently is enrolled in at least one subject at your Kumon Center and registers for a second or subsequent Subject.

• You pay Kumon the monthly royalty prescribed in the Operations Manual for each Subject-Franchise. Electronic debits are the only acceptable method for payment of royalties. You must allow Kumon to make monthly electronic debits from your EFT account equal to the amounts you owe it. It will debit your account each month for royalties due from each prior month.

• Kumon can change royalty rates or the monthly due date (or both) at any time on at least 60 days’ notice. If you are unwilling to pay any increased royalty rate, you can terminate the Franchise Agreement on 60 days’ written notice to Kumon. There is no contractual limit on the amount by which Kumon can change the royalty rates.

• The royalty during the TLP is higher than the royalty payable after completing the TLP. If and when you complete the TLP requirements for a Subject-Franchise, the lower royalty for that Subject-Franchise will take effect during the next full reporting month.

• If you underreport students enrolled at your Center and Kumon elects not to terminate your Franchise Agreement, for 3 years, you will pay the higher TLP royalty rate.

7.  Administrative Fee for Late Payment:  1.5% on the overdue amount each month or $75, whichever is higher

• Due Date:  When Kumon debits your account by EFT for a late payment.

• This fee is charged on the monthly statement and paid through EFT.

• You must pay a late fee (“Administrative Fee”) if you do not pay your royalties or any other amounts owed to Kumon by the time it debits your account by EFT each succeeding month.

• The amount of Administration Fee is subject to change in Kumon’s discretion and is included in the Operations Manual.

• The Administrative Fee is due when Kumon debits your account by EFT, and Kumon will charge you an Administrative Fee each month until you pay the past due amounts or sign a promissory note for the balance you owe Kumon.

8.  Late or Inaccurate Report Fee:  $200 for the first month you fail to submit a complete and accurate report on time; $500 for the second month that this occurs; $1,000 the third month that this occurs, with increments of $1,000 per month thereafter.

• Due Date:  When Kumon debits your account by EFT for a late or inaccurate submission.

• This fee is charged on the monthly statement and paid through EFT.

• Currently, Kumon also will charge you a Late Report Fee or Inaccurate Report Fee (per Center) for each month that you fail to submit a complete and accurate report on time for any of the following: Instructor B Reports, Student Application Forms, Placement Tests, and Achievement Tests.

9.  Insufficient Funds:  $25 per EFT attempt that has insufficient funds to cover the amount owed

• Due Date:  When requested by Kumon.

• Charge covers Kumon’s costs of failed EFT attempts.

10.  Insurance:  $4.80 per Math student per year

• Due Date:  When billed by Kumon twice a year.

• You must buy a commercial general liability insurance policy, including products liability, with a combined single limit for bodily injury and property damage liability in the minimum amount of $1,000,000 per occurrence and $2,000,000 aggregate.

• You may, if you wish, participate in the insurance program that Kumon makes available though its insurance carrier. If you decide to do so, the current cost for participation in this program is $4.80 per Math student per year.

• If you decide not to buy the package policy liability insurance that Kumon makes available, you must send it a certificate of insurance providing evidence that you have purchased insurance coverage meeting its minimum requirements.

• The certificate of insurance must name Kumon as an additional insured and must provide that the insurance carrier shall notify Kumon at least 30 days in advance of a cancellation of the policy.

11.  Indemnification:  varies

• Under the Franchise Agreement, you agree to indemnify Kumon and hold it harmless from any claim, liability, loss, or expense arising out of your activities as a Kumon franchisee. This means that if Kumon incurs any expenses to handle, settle, or dispute any matter relating to your activities as a Kumon franchisee (including attorneys’ fees, court costs, etc.), Kumon may require you to reimburse it for those costs.

12.  Shipping Costs for Materials:  $36 or actual shipping costs, whichever is less for ground shipping of your initial monthly order

• Due Date:  As stated on invoice.

• Other than the initial materials fee, Kumon will provide you with “Kumon Materials” (Placement Tests, Achievement Tests, Worksheets, Record Books, and Progress Charts) reasonably necessary for the operation of your Center at no additional charge; however, you must pay the shipping costs.

• Shipping costs will be charged on a per order basis. Kumon currently bills freight costs at $36 or actual shipping costs, whichever is less for ground shipping of your initial monthly order.

• Shipping costs will be charged to your monthly statement for orders placed within the month.

• Any additional or expedited orders will be charged at cost.

13.  Relocation Fee:  $2,000

• Due Date:  When your Center opens at the new location.

• Payable if fewer than 80% of your enrolled students transfer to the new location.

• Kumon has the right to charge you a new franchise fee upon its approval of a request to relocate your Center. Its present policy is to charge this fee if fewer than 80% of your enrolled students transfer to your new Center location; if more than 80% transfer, Kumon does not charge the fee.

14.  Payments for “Chargeable Items” Purchased From Kumon:  varies

• Due Date:  As stated on invoice.

• If you wish, you can purchase from Kumon supplemental teaching materials and promotional items for use or sale. These are called “Chargeable Items.”

• Kumon can discontinue the sale of or change the prices for Chargeable Items without notice.

15.  Liquidated Damages:  three times your average monthly royalty in the three months immediately prior to your last day of operating your Center

• Due Date:  Immediately upon notice.

• Applies if:

• You terminate your Franchise Agreement voluntarily without giving Kumon the required advance written notice specified in the Franchise Agreement.

• You propose to transfer your Center before Kumon gives you final approval of your candidate, or if it disapproves the candidate, and you fail to resume operating.

• The Franchise Agreement is automatically terminated under the circumstances detailed in the Franchise Agreement.

• You may voluntarily terminate your Franchise Agreement, but you must give Kumon advance written notice. If you fail to provide Kumon the advance written notice required in the Franchise Agreement, you must pay Kumon as liquidated damages an amount equal to three times your average monthly royalty due for the three months immediately prior to your last day of operating your Center.

• Kumon may waive this requirement if it decides your reasons for not following the time periods in the Franchise Agreement are justified.

16.  Temporary Transfer to Kumon:  10% of the average tuition charged by the 5 Kumon Centers that are closest to your Center, multiplied by the number of students enrolled at your Center for so long as Kumon has assumed operation of the Center(s) and reimbursement of any out-of-pocket costs that Kumon incurs

• Due Date:  Each month that it applies.

• If (i) you are absent from your Center without having made provision for the management of your Center during your absence pursuant to the policy contained in Kumon’s Operations Manual; or (ii) are absent without having made arrangements acceptable to Kumon for the operation of your Center in your absence; or ( iii ) you or any of your owners or employees is charged with a crime against children or involving moral turpitude; or (iv) you engage in any conduct that is susceptible of creating a crisis or immediate substantive damage to the Kumon Brand, Kumon has the right (but not the obligation) to take over operation of your Center(s) until you return, a disposition of your case is reached, or until the public relations crisis has ended.

• Kumon will charge you a management fee equal to 10% of the average tuition charged by the 5 Kumon Centers that are closest to your Center multiplied by the number of students enrolled at the Center for so long as Kumon has assumed operation of the Center(s) and will be entitled to reimbursement of any out-of-pocket costs that it incurs for the period it operates your Center.

17.  New Center Marketing:  $1,000 in both the fifth and sixth month after your Center is open

• Due Date:  5th and 6th month after you open your Center.

• You must reimburse Kumon for a total of $2,000 for advertising on your behalf.

• Within the first six months after your Center is open, the sum of $4,000 will be spent to promote, market, and advertise your Center.

• This sum shall be spent as follows: (1) once your Center is open, Kumon shall provide you with a credit of $1,000, to be spent by you for the purchase and use of promotional, marketing, and advertising material for your Center contained in Kumon’s selected vendor’s menu of promotional, marketing, and advertising material (this vendor currently is Market Hub; however, the vendor can be changed by Kumon at any time in the exercise of its discretion); and (2) Kumon shall spend the sum of $3,000 on your behalf for the purchase of promotional, marketing, and advertising material for your Center from digital sources it selects, and in its discretion.

• You shall reimburse Kumon for 50% of the credit and purchases.

• In both the 5th month and 6th month your Center is open, you shall reimburse Kumon the sum of $1,000, for a total of $2,000.

18.  Advertising Contribution:  at least the minimum amount set forth in the Operations Manual

• Due Date:  Annually.

• Currently, and except for the New Center Marketing requirement, Kumon does not require you to spend any minimum amount on advertising your Center, but it recommends that you spend at least $2,400 annually on such advertising.

• Kumon has the right, in its sole discretion, to establish a national advertising fund and/or regional advertising fund for the geographic area in which your Center is located.

• If it does so, it has the right to reallocate all or a portion of any monies that you are required to spend on authorized promotion and marketing of your Center to the applicable fund(s), and you will be required to contribute that amount to the fund(s).

19.  Audit Fees and Expenses:  the reasonable amount of fees and expenses incurred by Kumon for the audit and/or examination, plus the amount of any unpaid royalties and reimbursement of any instructor awards or subsidies given to you based upon inaccurate enrollment reports

• Due Date:  Immediately upon notice.

• Applies if Kumon examines and/or audits your Center’s records and discovers that you have underreported, failed to report, or misrepresented any student enrolled (or should be enrolled as required by the Franchise Agreement) at your Center.