Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Considering a Complete Nutrition Franchise? Don’t Overlook These 20 Important Franchise Fees

by Franchise Chatter on January 8, 2017

in Franchise Fees, Retail Franchise, Sports Nutrition Franchise

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Don't Invest in a Franchise Until You Check Out This List

Complete Nutrition Store Photo

If you are considering a Complete Nutrition franchise, don’t get blindsided by these 20 important franchise fees (from the initial franchise fee, to the royalty fee, to 18 other fees found in Items 5 and 6 of Complete Nutrition’s 2016 FDD).

  • Except as noted below, all fees are imposed by and are payable to Complete Nutrition Franchising, LLC, and are non-refundable. All fees are imposed under the Franchise Agreement unless otherwise noted.

1.  Initial Franchise Fee:  $49,500

  • You must pay Complete Nutrition an initial franchise fee in lump sum when you sign the Franchise Agreement. The initial franchise fee is $49,500 (the “Initial Franchise Fee”).
  • The Initial Franchise Fee is due at the time you sign the Franchise Agreement and is fully earned when paid. In no event is the Initial Franchise Fee refundable.

2.  Initial Inventory:  $15,000 to $25,000

  • Prior to opening your Store, you will need to purchase certain inventory, including nutritional supplements and related health and beauty products, marketing supplies, and equipment from Complete Nutrition or its affiliates.
  • Complete Nutrition estimates that you will need to spend between $15,000 and $25,000 on initial inventory purchases from its affiliate, R2, prior to opening your Store.
  • You must pay for these purchases within 30 days of your receipt of the inventory, supplies, or equipment.
  • R2 will refund your purchase of opening inventory only if and to the extent that such inventory is defective.

3.  Base Franchise Fee (Development Agreement):  $91,000 to $300,000

  • If you are granted Multi-Unit Development Rights, you will pay, in lieu of an Initial Franchise Fee, a Base Franchise Fee for all Stores under your Development Agreement, which will be due at the time you sign that agreement. The Base Franchise Fees, which are non-refundable, are listed in the chart below.
  • The Franchise Agreement you sign for each Unit will be Complete Nutrition’s then-current form of Franchise Agreement, provided that you will not have to pay an Initial Franchise Fee for any Store other than the Base Franchise Fees.
  • 2 Franchised Units Purchased:  $91,000 Base Franchise Fee
  • 3 Franchised Units Purchased:  $125,000 Base Franchise Fee
  • 6 Franchised Units Purchased:  $210,000 Base Franchise Fee
  • 10 Franchised Units Purchased:  $300,000 Base Franchise Fee

Incentive Programs

  • Complete Nutrition reserves the right to offer special incentive programs at any time in the future which may decrease any of the fees listed in Items 5, 6, and 7 of the disclosure document.
  • Currently, Complete Nutrition offers a $12,000 product inventory credit to members of the Armed Services. To qualify, you must show you have been honorably discharged from a branch of the United States Armed Services.
  • The $12,000 product credit will be applied to your purchase of the initial product inventory purchased from Complete Nutrition’s affiliate, R2 Distribution, LLC. The credit is only available for inventory for the first store the franchisee opens.
  • Generally, any incentive programs will be conditioned upon your execution of a Franchise Agreement and opening your Store by a specified date and may only be available for specific stores or in specified markets, which Complete Nutrition determines at its sole discretion.
  • Complete Nutrition may alter or discontinue these programs at any time at its sole discretion without notice to you. These incentive programs may not be combined with any other incentive offer unless Complete Nutrition otherwise indicates in writing. Furthermore, if you have executed a Franchise Agreement outside of the dates specified for the incentive programs, you are not eligible to receive the benefit of the incentive program.

4.  Franchise Royalties:  range from 8% to 9% of your Gross Sales depending on percentage of R2 Products (as defined in the Franchise Agreement) sold

  • Due Date:  Payable on the 5th day of the month based on the prior month’s Gross Sales.
  • Payments may be required to be made via electronic funds transfer (“EFT”) or some other method Complete Nutrition approves.
  • “Gross Sales” means the total amount of all sales of products, services, and merchandise sold from, though, or in connection with the Store, whether for cash, on credit, barter, or otherwise, exclusive of applicable sales, use, or service taxes.
  • The percentage of Franchise Royalties you are required to pay Complete Nutrition is determined pursuant to the following chart:

Percentage of Gross Sales Attributable to Sales of R2 Products:  0 to 74

  • Franchise Royalties:  9%

Percentage of Gross Sales Attributable to Sales of R2 Products:  75 and above

  • Franchise Royalties:  8%
  • At Complete Nutrition’s request, you will authorize it to take the Franchise Royalties from you by electronic transfer, and you must pay all costs associated with utilizing an electronic funds transfer program.

5.  Advertising Cooperative Contributions:  amount the Cooperative determines

  • Due Date:  As Cooperative specifies.
  • Payable only if your Store is a member of an advertising cooperative.
  • Complete Nutrition may designate a geographic area in which two or more Complete Nutrition stores are located as an area for an advertising cooperative (a “Cooperative”). The Cooperative’s members in any area are the owners of all the Complete Nutrition stores operating in that area (including Complete Nutrition and its affiliates, if applicable).
  • You must contribute to the Cooperative in the amounts that the Cooperative determines. The contributions you pay to any Cooperative you are required to join will count towards your Marketing Spending Requirement.

6.  Marketing Spending Requirement:  3% of the Store’s Gross Sales during the prior month

  • Due Date:  Payable monthly based on the prior month’s Gross Sales beginning the 4th full month of your operation of the Store.
  • Payable to approved vendors or to Complete Nutrition.
  • Commencing on the 4th full calendar month of the operation of your Store, you must spend at least 3% of the Store’s Gross Sales from the previous month on advertising, marketing, and promotional programs for the Store (the “Marketing Spending Requirement”).

7.  Additional Training and Assistance:  reasonable fee and expenses; currently, $250 per day, plus expenses

  • Due Date:  2 weeks after billing.
  • This is for additional assistance or training that you need, Complete Nutrition requires, or you request.
  • Complete Nutrition trains up to 3 persons initially, at no additional charge.
  • Complete Nutrition provides ongoing assistance free of charge for the first 6 months. Thereafter, it reserves the right to charge you a reasonable amount for any training or assistance it provides to you or your employees after the opening of the Store. Currently, its standard training fee is $250 per day.
  • You will also be responsible for any travel, meals, incidental, and lodging expenses incurred by persons conducting the training programs (Complete Nutrition’s employees) and persons attending the training program (your employees).
  • Complete Nutrition will make available continuing advisory assistance in a manner it deems appropriate. If it send its representatives to your Store to provide this continuing assistance, it reserves the right to charge a reasonable fee for this type of assistance.

8.  Relocation Fee:  up to $3,000

  • Due Date:  Upon Complete Nutrition’s approval of the relocation.
  • Payable if you request that Complete Nutrition approve the relocation of your Store.

9.  Transfer Fee (Franchise Agreement and Development Agreement):  $13,000

  • Due Date:  Upon Complete Nutrition’s approval of the transfer.
  • Payable when you sell your franchise or your development rights.

10.  Successor Franchise Fee:  50% of the then-current Initial Franchise Fee

  • Due Date:  At least 30 days prior to expiration of the term.
  • Payable if you renew the franchise.

11.  Late Charge:  1.5% per month or maximum legal rate

  • Due Date:  Upon demand.
  • Payable on all past due amounts.
  • You must pay interest on any unpaid amounts at the rate of the lesser of 1.5% per month or the maximum legal rate in the jurisdiction where your Store is located.
  • Interest begins to accrue on the due date of the applicable fee or other amount.

12.  Audit:  cost of audit

  • Due Date:  Upon demand.
  • Due only if you fail to report or understate Gross Sales by 2% or more.
  • If the amount of Gross Sales you report for any measured period is less than 98% of the actual Gross Sales for that period, you must reimburse Complete Nutrition for all costs of the investigation or audit that uncovered the under-reported sales, including salaries, professional fees, travel, meals, and lodging.

13.  Franchisee Convention:  up to $500 per person attending

  • Due Date:  When billed.
  • Complete Nutrition may charge you this fee to attend each franchisee convention (you also must pay your travel and living expenses).
  • This fee is intended to help cover Complete Nutrition’s conference costs and may increase if its costs increase.

14.  Product Purchases:  varies based on quantity purchased

  • Due Date:  When billed.
  • You pay Complete Nutrition’s affiliate and/or approved suppliers. Payment will include cost of goods, taxes, shipping, and handling. Currently, you must purchase certain items such as the nutritional supplements and health and beauty products for your Store from Complete Nutrition or its affiliates.
  • The price and terms and conditions for these purchases are contained on the price list that Complete Nutrition or its affiliates will supply to you from time to time (“Price List”). Complete Nutrition reserves the right, for itself and its affiliates, to update the Price List and change the terms and conditions for these purchases at any time on 30 days’ notice.
  • All of the individuals who guarantee the Franchise Agreement must also guarantee all of your purchases of products and equipment from Complete Nutrition or its affiliates.
  • You must pay for all taxes, shipping, and handling costs.
  • If you fail to pay for any products or equipment when payment is due, Complete Nutrition or its affiliates can require you to pay for future products and/or equipment on a C.O.D. basis or withhold shipment of products and/or equipment in addition to requiring you to pay late fees and interest.

15.  Liquidated Damages for Violation of Manual:  $100 to $1,000 per day

  • Due Date:  Upon demand.
  • Depending on the nature of the violation, these amounts are payable for each day you fail to comply with the mandatory terms of the Manual, offer for sale or sell unauthorized products or services, or fail to satisfy the 70% threshold for Gross Sales of Complete Nutrition products.
  • Uniformity of products and services offered by all Complete Nutrition Stores is of utmost importance to the franchisor, its franchisees, and the System. If you offer to sell or do sell products or services that are not authorized or are not prepared in accordance with the Operations Manual, fail to satisfy the 70% threshold for Gross Sales of Complete Nutrition products, or if you fail to conform with any other mandatory standards set forth in the Manual, Complete Nutrition will have the right to charge you for its damages caused by your non-compliance, which will be calculated at the rates set forth in the Operations Manual based on the type of violation, which amounts shall be between $100 and $1,000 per day for each violation.
  • Complete Nutrition has the right to collect these amounts in addition to any and all of its other rights for non-compliance provided for under the Franchise Agreement.

16.  Liquidated Damages Upon Termination:  average amount of monthly royalty fees and other fees for prior twelve months, multiplied by the number of months remaining in the term

  • Due Date:  15 days after termination.
  • In the event Complete Nutrition terminates the Agreement, you must pay it liquidated damages to compensate it for lost future royalties and fees.
  • The amount of liquidated damages will be equal to the average amount of monthly royalty fees and other fees due to Complete Nutrition under the Agreement for the twelve months immediately preceding the termination of the Agreement, multiplied by the number of months remaining in the term of this Agreement.
  • You must pay the liquidated damages payment in no event later than fifteen (15) days after the effective date of the termination of the Agreement.
  • Complete Nutrition’s right to receive the liquidated damages payment from you is in addition to and will not affect its other rights under the Agreement and applicable law (including its rights to collect other amounts owed, such as past royalties and fees, amounts due for product purchases, etc.).

17.  Indemnification (Franchise Agreement and Development Agreement):  will vary under circumstances

  • Due Date:  As incurred.
  • Payable if anyone asserts claims against Complete Nutrition arising from your Store operations.

18.  Costs and Attorneys’ Fees (Franchise Agreement and Development Agreement):  will vary under circumstances

  • Due Date:  As incurred.
  • Payable if you fail to comply with the Franchise Agreement.

19.  Taxes (Franchise Agreement and Development Agreement):  actual cost

  • Due Date:  Upon demand.
  • You must pay Complete Nutrition the amount of any State or local sales, use, gross receipts, or similar tax that the State or local government authority imposes on fees which you pay to Complete Nutrition, without offset or deduction of any kind.
  • Your obligation to reimburse Complete Nutrition for these taxes does not extend to income-type taxes which a State or local government imposes on Complete Nutrition’s income.

20.  Interest on Late Payments to R2 Distribution:  lesser of 1.5% per month or highest rate allowed by law

  • Due Date:  Upon demand.
  • Interest is payable on all past due purchases from R2 Distribution.
  • Until past due order is cleared, new orders will be cash in advance.

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