If you are considering a Black Bear Diner franchise, don’t get blindsided by these 18 important franchise fees (from the initial franchise fee, to the royalty fee, to 16 other fees found in Items 5 and 6 of Black Bear Diner’s 2016 FDD).
1. Initial Franchise Fee: $24,000 to $55,000
- You must pay an initial Franchise Fee based on the number of existing Black Bear Diner restaurants you currently operate according to the following schedule when you sign the Franchise Agreement.
Number of Franchised Restaurants: 1-2 Restaurants
- Franchise Fee: $55,000
Number of Franchised Restaurants: 3 Restaurants
- Franchise Fee: $50,000
Number of Franchised Restaurants: 4-7 Restaurants
- Franchise Fee: $32,000
Number of Franchised Restaurants: 8+ Restaurants
- Franchise Fee: $24,000
- The Franchise Fee is paid to Black Bear Diner in a lump sum and is non-refundable except as described below.
- The Franchise Fee is uniform for all franchisees except if you develop multiple Franchised Restaurants under an Area Development Agreement described below.
- For Black Bear Diner’s most recent fiscal year, the initial Franchise Fee ranged from $0 to $40,000.
- The Franchise Fee is used to compensate Black Bear Diner for pre-opening and ongoing obligations and any remaining amount will represent profit to Black Bear Diner.
- Black Bear Diner will refund all but $10,000 of the initial Franchise Fee under any one of the following conditions:
- (i) you do not locate a suitable site within 60 days after signing the Franchise Agreement and Black Bear Diner elects to terminate the Franchise Agreement; or
- (ii) you do not sign a lease for a suitable site within 180 days after signing the Franchise Agreement and Black Bear Diner elects to terminate the Franchise Agreement; or
- (iii) Black Bear Diner determines that you are unable to complete the training program described in Item 11 to its satisfaction and it elects to terminate the Franchise Agreement.
2. Option Fee: $10,000
- Black Bear Diner only offers existing, qualified franchisees the opportunity to enter into an Option Agreement for the development and operation of one additional Black Bear Diner restaurant.
- If you and Black Bear Diner enter into an Option Agreement, you will pay a $10,000 fee (“Option Fee”) when you sign the Option Agreement.
- Black Bear Diner will apply the Option Fee toward the initial Franchise Fee if you and Black Bear Diner move forward.
- You may terminate the Option Agreement at any time before you sign the Franchise Agreement. Black Bear Diner may terminate the Option Agreement if you do not sign a Franchise Agreement within one year from signing the Option Agreement.
- The Option Fee is fully earned when paid and is not refundable under any circumstances.
3. Development Fee: 50% of the initial Franchise Fee for each of the Franchised Restaurants you agree to develop after the first one
- Under the Area Development Agreement, you are required to execute one Franchise Agreement and pay the Franchise Fee for the first Franchised Restaurant simultaneously with the execution of the Area Development Agreement.
- Under the terms of the Area Development Agreement, the Franchise Fee for each Franchised Restaurant is based on the number of Black Bear Diner restaurants you agree to develop according to the following schedule.
Number of Franchised Restaurants to be Developed – 1
- Franchise Fee: $55,000
- Development Fee: $0
Number of Franchised Restaurants to be Developed – 2
- Franchise Fee: $45,000
- Development Fee: $22,500
Number of Franchised Restaurants to be Developed – 3
- Franchise Fee: $40,000
- Development Fee: $20,000
Number of Franchised Restaurants to be Developed – 4-7
- Franchise Fee: $32,000
- Development Fee: $16,000
Number of Franchised Restaurants to be Developed – 8+
- Franchise Fee: $24,000
- Development Fee: $12,000
- You must pay a Development Fee equal to 50% of the initial Franchise Fee for each of the Franchised Restaurants you agree to develop after the first one.
- Black Bear Diner and you will agree on the number of Franchised Restaurants to be developed before you sign the Development Agreement.
- In addition, the Development Agreement will contain a minimum “Development Schedule” which will specify when each of the Franchised Restaurants must be operational.
- For example, if you agree to develop 5 Franchised Restaurants within a specified Development Territory, you will sign a single Franchise Agreement and pay an initial Franchise Fee of $55,000 for the first Franchised Restaurant and sign a Development Agreement for the remaining 4 Franchised Restaurants. The Development Fee will be equal to 50% of the Franchise Fee for each Franchised Restaurant to be developed and as a result, the total amount of the Development Fee would be $74,500 ($22,500 + $20,000 + $16,000 + $16,000) for the four Franchised Restaurants to be developed.
- When you execute a Franchise Agreement for the second and each subsequent Franchised Restaurant, you will pay the Franchise Fee as stated in the chart above; however, you will receive a credit in the amount of the Development Fee you paid per Franchised Restaurant under the Development Agreement. As a result, your balance due at the time you execute each Franchise Agreement will be 50% of the Franchise Fee.
- The Development Fee is fully earned by Black Bear Diner when paid, even if you do not fulfill your obligations under that agreement, and is not refundable under any circumstances.
Unless stated otherwise, all fees are imposed and collected by and payable to Black Bear Diner. No fees are refundable. Existing franchisees may have fees that differ from those stated below.
4. Royalty: 4.5% of Gross Sales
- Due Date: Weekly.
- Amounts due will be withdrawn by electronic funds transfer (“EFT”) or other methods Black Bear Diner periodically specifies.
- “Gross Sales” means the total amount of all revenues that you receive from the sale of all menu items, Gift Shop Products, banquet and catering services, and from goods and services from all sources in any way connected with the Franchised Restaurant whether for check, cash, credit, or otherwise, including, without limitation, all proceeds from any business interruption insurance, less sales tax collected from customers and paid to the appropriate taxing authorities.
5. Marketing Fund Contribution: 1% of Gross Sales
- Due Date: Weekly.
- Black Bear Diner has the right to increase this amount to 2% upon 30 days notice to you.
6. Local Advertising: 1% of Gross Sales
- Due Date: Monthly.
- You pay directly, subject to Black Bear Diner’s approval. Payable to suppliers of advertising services.
7. Audit Expenses: cost of audit, plus interest
- Due Date: As invoiced.
- Payable only if the audit shows an understatement in amounts due of at least 3%.
8. Late Payment Interest: 18% of the overdue amount, calculated daily, or the maximum rate permitted by law, whichever is less
- Due Date: After due date.
- Applies to all Royalty Fees, Advertising Fund Contributions, and amounts due for purchases from Black Bear Diner or its affiliate.
9. Bear Country Store Product Purchases: will vary under circumstances
- Due Date: As required.
- You must purchase these products from Black Bear Diner’s approved or designated suppliers in order to meet anticipated customer demand.
10. Credit, Debit, and Black Bear Diner Gift Card Processing: approximately $50 per month, plus transaction fee of approximately .085/item
- Due Date: As required.
- This fee is imposed by Black Bear Diner but payable to third party vendor.
11. Software License Fees: $99 to $300 depending on the modules you select
- Due Date: Monthly.
- You are required to use Ctuit and Aloha software in the operation of your Restaurant. The fee is payable to Black Bear Diner, who remits it to the software licensor.
12. Suppliers’ Approval: reasonable cost of evaluation and actual cost of test, not to exceed $1,000
- Due Date: Time of inspection.
- Applies to costs in connection with evaluating a supplier or testing a product at your request.
13. Reimbursement of Amounts Paid on Your Behalf: Black Bear Diner’s costs
- Due Date: Within 15 days after billing.
- Payable only if you are required to reimburse Black Bear Diner for amounts paid on your behalf.
14. Transfer Fee: $20,000
- Due Date: Before transfer.
- This transfer fee does not apply to a transfer to an entity you own or control.
15. Ongoing Training: you are required to pay your expenses as well as your employees’ expenses in attending training
- Due Date: Prior to training.
- Attendance will not be required more than 2 times per year and will not last more than 2 days per session.
16. Food Safety and Sanitation Inspections: Black Bear Diner’s expenses in connection with each inspection of your Franchised Restaurant, which are currently approximately $300 per inspection
- Due Date: Upon Demand.
- Black Bear Diner uses a third party to perform food safety and sanitation inspections. Currently, there are three inspections per year. You must reimburse Black Bear Diner for the costs of the inspections.
17. Cost and Attorneys’ Fees: will vary under circumstances
- Due Date: As incurred.
- You will reimburse Black Bear Diner for all costs if you fail to comply with the Franchise Agreement or any other agreement.
18. Indemnification: will vary under circumstances
- Due Date: As incurred.
- You defend suits at your cost and hold Black Bear Diner harmless against suits involving damages resulting from your operation of the Franchised Restaurant.
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