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Considering a GNC Franchise? Don’t Overlook These 33 Important Franchise Fees

by Franchise Chatter on December 24, 2016

in Franchise Fees, Retail Franchise, Sports Nutrition Franchise



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GNC Store Photo by RetailByRyan95

If you are considering a GNC franchise, don’t get blindsided by these 33 important franchise fees (from the initial franchise fee, to the royalty fee, to 31 other fees found in Items 5 and 6 of GNC’s 2016 FDD).

1.  Initial Franchise Fee:  $20,000 to $40,000

  • Before you are awarded a franchise for a GNC Store, you must sign a Franchise Agreement with GNC and pay it an initial franchise fee. The initial franchise fee is payable in a lump sum and is fully earned when the Franchise Agreement is signed.
  • The initial franchise fee for a GNC Store varies according to the type of franchise you purchase and is shown in the table below.

New Franchise Store

  • If awarded to a New Franchisee:  $40,000
  • If awarded to an Existing Franchisee:  $30,000
  • If awarded to an Employee:  $20,000

Conversion Store

  • If awarded to a New Franchisee:  $40,000
  • If awarded to an Existing Franchisee:  $30,000
  • If awarded to an Employee:  $20,000

2.  Development Fee:  see formula below

  • Under the Development Agreement, you will obtain the right to develop and open an agreed upon number of GNC Stores, provided you do so in accordance with the specified Development Schedule.
  • You must pay GNC a development fee (“Development Fee”) equal to the sum of the following:
  • (i) a development rights fee for the Development Area (which will be determined by GNC and will vary depending on the location of the Development Area and other factors it deems relevant),
  • (ii) a fee equal to the applicable initial franchise fee shown in the table above for the first GNC Store you agree to develop and open, and
  • (iii) a fee equal to 50% of the total initial franchise fees for the remaining GNC Stores required to be developed and opened during the term of the Development Agreement.
  • The Development Fee is payable in a lump sum upon execution of the Development Agreement and is fully earned when the Development Agreement is signed.

3.  Royalty:  6% of total gross sales

  • Due Date:  You make 13 payments per calendar year; 12 days after the applicable period ends.
  • Gross sales include all revenue from the franchise location. Gross sales do not include sales tax or substantiated refunds in the ordinary course of business.
  • GNC’s fiscal year begins on the first Sunday in January. One of its accounting periods equals 4 weeks, and there are 13 accounting periods in its fiscal year.

4.  National Advertising:  3% of total gross sales

  • Due Date:  Same as Royalty fee.

5.  Transfer Fee – Franchise Agreement:  transfer fee equal to then-current initial new store franchise fee except that the franchise fee is reduced to (1) $1,000 if you transfer all or a controlling interest in your franchise to an entity that you own (or that is owned by, or under the same ownership as, the existing franchisee), or if the transfer is to your immediate family member; or (2) transfer fee of $2,500 if the transfer is of less than 50% of your ownership interest in the franchise or the existing franchisee

  • Due Date:  At the time a signed Franchise Agreement is returned to GNC, or if a Franchise Agreement is not signed in connection with the transfer, at the time of transfer.
  • Payable when you sell your franchised business or otherwise complete a transfer, which you may only do with GNC’s prior consent.

6.  Transfer Fee – Development Agreement:  $10,000

  • Due Date:  Upon a permitted assignment of the Development Agreement.
  • Payable when you transfer your Development Agreement, which you may only do with GNC’s prior consent.

7.  Franchise Store Relocation Fee:  $10,000 or such greater amount as GNC may determine from time to time, to cover its administrative and other costs in processing the relocation

  • Due Date:  Payable upon the permitted relocation of your GNC store.
  • You may request to relocate your GNC store if you cannot continue to operate due to an act of God (fire, flood, earthquake) or extreme hardship.
  • Approval of a relocation is in GNC’s sole discretion. It may at times waive this fee on a case-by-case basis if, in its sole discretion, circumstances merit.

8.  Refurbishing:  variable, may include certain equipment upgrades or additions

  • Due Date:  When refurbishing is complete.
  • Any additions, alterations, or replacements that are necessary to keep your Store in good condition or to comply with annual or more frequent merchandising requirements.
  • Expenses will depend on your Store maintenance practices.

9.  Regulatory Compliance:  GNC’s cost and expense for bringing your Store into compliance

  • Due Date:  Upon demand.
  • You will only incur this cost if you fail to take a regulatory corrective measure, and GNC corrects the failure itself. It has no duty to ensure your regulatory compliance.

10.  Remodeling:  reasonable cost to upgrade Store

  • Due Date:  When remodeling is complete.
  • Once every 5 years, if GNC determines it is necessary, or periodically and potentially more frequently, as required by the terms of the Franchise Agreement and Store lease or sublease.
  • You may be required to remodel the Store, at your expense, at the time of entering into a Franchise Agreement if you franchise a Conversion Store.

11.  Payments for Goods or Services:  varies

  • Due Date:  Periodic when bill is received.
  • You must purchase from GNC the products set forth in the current General Nutrition Center Inventory Plan. The Inventory Plan sets forth the required Store layout and design and provides for the types of products you must carry, including specific GNC and non-GNC brand products.

12.  Insurance:  premiums for required insurance

  • Due Date:  Before you open your Store and periodically after that.
  • Payable to a third party.

13.  Late Payment Charges:  1 1/2% interest per month on overdue amount

  • Due Date:  Immediately.
  • This charge applies to all payments you owe GNC.

14.  Insufficient Funds Fee:  $30 per occurrence

  • Due Date:  Immediately on demand.
  • Payable if any of your payments to GNC are not honored by your financial institution.

15.  POS Register Maintenance:  $51 per month (1st year), $73.68 per month (2nd year)

  • Due Date:  Monthly.
  • You pay GNC.
  • You must sign the POS License Agreement which is located in Exhibit M of the Disclosure Document to receive the POS system.
  • You will be charged POS system maintenance fees to cover the costs of supporting the system. Maintenance fees cover the actual costs of the system.

16.  POS Communications:  $165 per month (without Internet), $233.33 per month (with Internet)

  • Due Date:  Monthly.
  • You pay GNC.

17.  POS Secure Payment System Fee:  $13.50 per month

  • Due Date:  Monthly.
  • You pay GNC.

18.  Financial Services:  $345 (1 Store), $320 per Store (2-5 Stores), $295 per Store (6-9 Stores)

  • Due Date:  Monthly.
  • You pay GNC.
  • GNC may (but is not obligated to) provide financial services to you through General Nutrition Financial Services. If it chooses to provide these services, and you opt to or are required to use them, you will pay GNC the monthly fee(s) above for financial services.
  • You will pay GNC the fee shown for One Store, plus the applicable fee for each subsequent Store that you franchise, on a monthly basis.

19.  Maintenance of Inventory:  variable, depending on sales

  • Due Date:  Ongoing.
  • You pay GNC and/or its approved suppliers.
  • The cost of replenishing your inventory depends on your sales.
  • GNC requires you to maintain a minimum of $60,000 of inventory at wholesale cost, provided that you must otherwise maintain adequate inventory to effectively operate.

20.  Lease Negotiation:  variable depending on the circumstances

  • Due Date:  As incurred.
  • If you lease directly from the landlord, you are responsible for all costs associated with lease negotiations and lease review.

21.  Lease Audit Fee:  30% of the amount of any savings

  • Due Date:  As incurred.
  • If GNC conducts an audit of CAM (common area maintenance) or other charges under your lease or sublease.

22.  Rent:  variable, depending on square footage of location

  • Due Date:  Monthly.
  • If you sublease from GNC, you pay GNC; if not, you will pay rent to your Landlord.

23.  Franchise Renewal:  37 1/2% of the then-current initial franchise fee for new franchisees for a new franchise Store

  • Due Date:  On or before the then-current term expiration date.
  • You pay GNC.
  • Additionally, GNC may require you to remodel in connection with the renewal.

24.  Advisory Assistance and Services:  will vary depending on the circumstances

  • Due Date:  As incurred.
  • You may be required to reimburse GNC for unusual, extensive, or extraordinary assistance.

25.  Audit:  if an audit discloses an understatement of 3% or more in any report of Gross Sales, you must reimburse GNC for all costs and expenses of the audit.

  • Due Date:  Immediately on demand.

26.  Indemnification:  will vary depending on the circumstances

  • Due Date:  As incurred.
  • You must reimburse GNC if it is held liable for damages or other expenses related to the operation of your franchise.

27.  Attorneys’ Fees and Costs:  will vary depending on the circumstances

  • Due Date:  As incurred.
  • Payable only if you do not comply with the Franchise Agreement.

28.  Liquidated Damages:  will vary depending on the circumstances

  • Due Date:  Immediately on demand.
  • You pay GNC.

29.  Default Cure Fee:  up to $1,000 per occurrence, depending on the infraction

  • Due Date:  On or before the expiration of the cure period.
  • You pay GNC.

30.  Annual Inventory Fee:  approximately $540

  • Due Date:  Annually.
  • You are required to conduct an annual physical inventory count, which GNC will perform.
  • If you participate in General Nutrition Financial Services, the annual inventory fee is included in your monthly financial services fee.
  • If you do not participate in General Nutrition Financial Services, you will be billed annually for the total inventory cost.

31.  Non-compliance Management Fee:  10% of total gross sales

  • Due Date:  As incurred and if necessary.
  • Gross sales include all revenue from the franchise location. Gross sales do not include sales tax or substantiated refunds in the ordinary course of business.
  • If you are in default of your franchise obligations and unable to operate your Store to GNC’s standards, GNC may, in its sole discretion, assume operations of the Store for any period of time, and you will be required to pay to it 10% of your total gross sales earned during the period in which it operates the Store, in addition to any other royalties and fees payable to it pursuant to your Franchise Agreement.

32.  Operating Management Fee:  $1,500 per week

  • Due Date:  As incurred and if necessary.
  • In the event that a franchisee dies or is disabled, GNC may, in its discretion, operate the Store until such time that a transfer can be completed under the terms of the Franchise Agreement.

33.  Customer Satisfaction Program Fee:  $18 per month or such other amount as GNC may determine from time to time

  • Due Date:  Monthly.
  • GNC requires you to participate in any customer satisfaction program it may establish, as may be changed by it from time to time in its sole discretion.



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