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Earnings Claims of Top Franchises Revealed

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Considering a Hooters Franchise? Don’t Overlook These 26 Important Franchise Fees

by Franchise Chatter on December 30, 2016

in Franchise Fees, Restaurant Franchise, Sports Bar Franchise



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If you are considering a Hooters franchise, don’t get blindsided by these 26 important franchise fees (from the initial franchise fee, to the royalty fee, to 24 other fees found in Items 5 and 6 of Hooters’ 2016 FDD).

1.  Application Fee:  $3,000

  • After you and Hooters have had preliminary discussions, it will send you its application for prospective franchisees, a copy of which appears as Exhibit A to the Disclosure Document.
  • You must pay an application fee (the “Application Fee”) of $3,000 in a lump sum when you deliver the application to Hooters. If you and Hooters enter into a Franchise Agreement, it will credit the Application Fee against the amount of the Initial Franchise Fee.

2.  Initial Franchise Fee:  $75,000

  • You must pay Hooters an initial franchise fee of $75,000 (the “Initial Franchise Fee”). You must pay the entire Initial Franchise Fee in a lump sum when you sign the Franchise Agreement and deliver it to Hooters.

3.  Development Fee:  $15,000 to $25,000 for each Restaurant you agree to develop under the Development Agreement



  • You and Hooters may enter into a Development Agreement, which will give you certain rights to develop Restaurants in a particular Development Area in compliance with a Development Schedule.
  • Under the Development Agreement, you must pay a Development Fee, which will be $15,000 to $25,000 for each Restaurant you agree to develop under the Development Agreement; the exact amount will depend on the area where you will develop the Hooters Restaurants, and the number of Hooters Restaurants that you will commit to develop. You must pay Hooters the Development Fee in one lump sum, at the time you sign the Development Agreement.
  • For each Restaurant you develop under the Development Agreement, you will enter into an individual Franchise Agreement, and you will pay an Initial Franchise Fee of $75,000. For each Hooters Restaurant to be developed under the Development Agreement, your Development Fee of $15,000 to $25,000 (depending on the amount paid when you signed the Development Agreement, as described above) will be credited towards the Initial Franchise Fee when the Franchise Agreement for that Hooters Restaurant is signed. The remainder of the Initial Franchise Fee will be payable in one lump sum upon the signing of the relevant Franchise Agreement.

4.  Extensions:  $5,000

  • You must open your Restaurant for business within 6 months after the Effective Date of the Franchise Agreement. Hooters refers to this opening date as your “Opening Date.”
  • Hooters may, on your request, grant you one 90-day extension past the six months allotted within which to open the Restaurant. You must pay Hooters a nonrefundable extension fee of $5,000 at the same time that you request the extension.
  • If you have applied for all building permits, alcoholic beverage licenses, and other permits required to open your Restaurant within 90 days after the Effective Date of the Franchise Agreement, Hooters may, upon your request, grant you one 30-day extension to obtain all necessary permits, without charging you any fee, if the delay is due to causes beyond your reasonable control. Hooters will not unreasonably withhold its consent to this extension. You must submit documentation of the status of the applications together with your request for each extension.

5.  Training: Initial Restaurant:  $12,000 to $20,000

  • Hooters describes its training program in Item 11 of the Disclosure Document. You must pay Hooters the expenses for trainers whose costs it describes in Item 11. These amounts range from $12,000 to $20,000, depending on the number of trainers you need, the trainers’ experience, how far the trainers must travel, and other factors. Hooters will provide you with invoices for the amounts owed.

6.  Site Evaluation Fee:  up to $7,500

  • Hooters has the right to use a third party to perform site evaluation services for it. If it uses such services, you must pay the cost of these services, up to $7,500.

Limited Refundability

  • If you are unable to obtain all necessary permits and licenses during the stated period and extension time periods as a result of cases beyond your reasonable control, either you or Hooters may terminate the Franchise Agreement, on written notice to the other, without the necessity of further action by either party or further documentation.
  • On this termination, Hooters will retain one-third of the Initial Franchise Fee. It will refund two-thirds of the Initial Franchise Fee to you within 30 days after notice by you or Hooters of the termination of the Franchise Agreement.

7.  Continuing Royalty Fee:  5% of Gross Sales

  • Due Date:  By the 10th day after the end of each 4-week accounting period.
  • Continuing royalties are due from the date you open your Restaurant.
  • “Gross Sales” includes all revenue related to the sale of products and performance of services in, at, about, through, or from your Restaurant, whether for cash or credit, and regardless of collection in the case of credit, and income of every kind and nature related to your Restaurant, including without limitation insurance proceeds and condemnation awards for loss of sales, profits, or business; and further including without limitation amounts from vending machines, slot machines or gambling devices (if permitted in writing by Hooters), any coin-operated machines for vending merchandise to customers, entertainment devices for the playing of electronic or manual games, pool tables, juke boxes, ATM fees, liquor, gift cards, merchandise, delivery, catering, and any off-premises consumption.
  • “Gross Sales” does not include:
  • (i) revenues from sales taxes or other add-on taxes you collect from guests and actually transmit to the appropriate taxing authority;
  • (ii) tips guests give and that are charged to the guests’ credit or debit cards; and
  • (iii) the retail value of any complimentary services, discounts, trade-outs, credit card fees, cash refunds to guests, and coupons used by guests (collectively, the “Comps”), up to a maximum of 2% of Gross Sales in the aggregate.

8.  National Advertising Fee:  currently, 2.5% of Gross Sales

  • Due Date:  By the 10th day after the end of each 4-week accounting period.
  • Hooters deposits these payments into the National Advertising Fund. It controls this fund and also has the right to terminate it.

9.  Local Advertising and Promotion:  currently, 1.0% of Gross Sales

  • You must spend at least this amount annually on local advertising and promotion.

10.  Local Advertising Cooperative:  none currently

  • Due Date:  If established, the due date will be by the 10th day after the end of each 4-week accounting period.
  • Hooters has the right to establish a cooperative within your marketing area. If it does so, it may, upon 90 days’ notice, require that some or all of your Local Advertising and Promotion contributions be contributed instead to the Local Advertising Cooperative.

11.  Product Purchases:  will vary under the circumstances

  • Due Date:  On receipt of invoice.
  • Payable to Hooters’ affiliates that are authorized suppliers for products, supplies, and merchandise for your Restaurant.

12.  Insurance Proceeds:  will vary under the circumstances



  • Due Date:  As incurred.
  • You may terminate the Franchise Agreement if your Restaurant is substantially destroyed by fire or other casualty, by paying Hooters 5% of all insurance proceeds. Hooters does not require you to reconstruct the Restaurant.

13.  Training Expense:  will vary under the circumstances

  • Due Date:  As incurred.
  • Except as otherwise mentioned in Item 11 and in the Franchise Agreement, you must pay Hooters the expenses of its front-of-house trainers, back-of-house trainers, and Hooters Girls. These expenses include travel expenses, per diem, and lodging expenses.
  • Travel within 250 miles of a Restaurant is by automobile, and drivers are paid $0.51 per mile. Travel farther than 250 miles is by commercial airline with tickets booked to minimize fares, subject to availability.
  • Per diem is currently $40 USD (or equivalent) per day, and is based on location and conversion rates, unless Hooters approves some other amount in advance.
  • You may negotiate lodging rates locally; however, you must provide lodging that is safe, secure, clean, and close to the Restaurant. If Hooters determines that the lodging you have chosen is unsuitable, it has the right to move its people to a different facility at your expense.
  • Hooters may change the rates shown above at its discretion, on notice to you. It will provide you with invoices for amounts you owe it. Hooters may require you to prepay all or a portion of the amounts it expects to incur. You must pay all amounts so that Hooters receives the payment by the end of 30 days after it sends you the invoice.

14.  Interim Operation of Restaurant (Temporary Management):  will vary under the circumstances

  • Due Date:  On receipt of invoice.
  • If you die or are disabled, or if the principal owner of the franchisee that is a business entity dies or is disabled, and your Restaurant is not being managed by a manager who has successfully completed training, Hooters has the right to appoint a manager for the Restaurant until an assignee it approves assumes management and operation of the Restaurant.
  • If Hooters manages the Restaurant, you must pay it, in addition to all other amounts due, a fee of 8% of Gross Sales, in addition to costs (including travel and living expenses of the temporary manager, and any direct expenses) of managing the Restaurant on your behalf during the time.
  • In addition to management expenses, Hooters has the right to charge the account the full amount of the direct expenses it incurs in managing the Restaurant on your behalf.

15.  Evaluating New Suppliers/Products:  will vary under the circumstances

  • Due Date:  On receipt of invoice.
  • Hooters has the right to evaluate prospective suppliers you recommend and to sample their goods. It may charge you a reasonable fee, not to exceed the actual costs of inspection and testing, for this service.

16.  Travel Expenses:  will vary under the circumstances

  • Due Date:  As incurred.
  • You must pay Hooters the actual reasonable travel expenses of its personnel if it rejects your proposed site, or if it inspects alternative sites.

17.  Relocation of Restaurant:  $5,000, plus Hooters’ out-of-pocket expenses

  • Due Date:  On demand.
  • You must comply with Hooters’ relocation policy, which is part of its Manuals and may be amended by it from time to time.

18.  Transfer Fee:  20% of the then-current Initial Franchise Fee

  • Due Date:  Before it approves transfer.
  • You must pay a transfer fee if you transfer the Franchise or a controlling interest in it.

19.  Transfer Application Fee:  $3,000

  • Due Date:  Before Hooters approves transfer.
  • Any Transfer Application Fee you paid specifically for a proposed controlling interest transfer will be credited against the payment of Transfer Fee.

20.  Renewal Fee:  $25,000

  • Due Date:  When you send Hooters your Renewal Notice.
  • The initial term of the Franchise Agreement is 20 years. You may renew for two additional 10-year
    terms.

21.  Liquidated Damages:  will vary under the circumstances

  • Due Date:  On demand.
  • If Hooters terminates the Franchise Agreement before the initial term expires, you must pay Hooters an amount equal to the fees payable by you for the lesser of (1) the balance of the initial term remaining on your Franchise Agreement; or (2) the 26 four-week periods immediately before the date of the notice of termination.
  • If Hooters terminates the Franchise Agreement before the expiration of 26 four-week periods, Hooters will project the amount of fees payable for the 26 four-week periods. If you close the Restaurant before the expiration of 26 four-week periods, Hooters will project the amount of fees payable for the 26 four-week periods.
  • If applicable law does not permit Hooters to collect liquidated damages, it will be entitled to collect actual damages.

22.  Audit Costs:  will vary under the circumstances

  • Due Date:  On receipt of invoice.
  • If Hooters conducts an audit and determines that you have understated any payment to it by 2% or more, you must reimburse it for its actual costs in conducting the audit.
  • Includes all costs related to the audit, like reasonable accountants’ and attorneys’ fees. It may also require you to submit audited financial statements.

23.  Interest:  lesser of 18% per annum or the maximum rate allowed by law

  • Due Date:  On demand.
  • Payable on all overdue amounts.

24.  Costs and Attorneys’ Fees:  will vary under the circumstances

  • Due Date:  As incurred.
  • Payable if Hooters is the prevailing party in a legal proceeding, or if it incurs costs due to your breach of the Franchise Agreement or Development Agreement (even if no formal legal proceeding is initiated).

25.  Indemnification:  will vary under the circumstances

  • Due Date:  As incurred.
  • You must reimburse Hooters if it is held liable for damages or other relief related to your Restaurant.

26.  Injunctive Relief:  will vary under the circumstances

  • Due Date:  On receipt of invoice.
  • You must pay Hooters for all damages, costs, and expenses, including reasonable attorneys’ fees, it incurs in obtaining injunctive or other relief for enforcing your compliance with the Franchise Agreement.


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