Considering a Black Bear Diner Franchise? Don’t Overlook These 25 Important Franchise Fees

Updated July 5, 2020

If you are considering a Black Bear Diner franchise, don’t get blindsided by these 25 important franchise fees (from the initial franchise fee, to the royalty fee, to 23 other fees found in Items 5 and 6 of Black Bear Diner’s 2020 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 at the time of signing the Franchise Agreement and is deemed to be fully earned upon receipt and is non-refundable.

• 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 $24,000 to $55,000.

• Black Bear Diner will refund all but $10,000 of the initial Franchise Fee if it 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.

• The Franchise Fee is used to compensate Black Bear Diner for expenses and costs in granting the franchise and is non-refundable under any other circumstances.

2.  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.

3.  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.

4.  Marketing Fund Contribution:  1.5% of Gross Sales

• Due Date:  Weekly.

• Black Bear Diner has the right to increase this amount to 2% upon 30 days’ notice to you.

5.  Local Advertising:  1.5% of Gross Sales

• Due Date:  Monthly.

• You pay directly, subject to Black Bear Diner’s approval. Payable to suppliers of advertising services.

• Within 30 days after the end of each month, you must provide Black Bear Diner with an accounting of your expenditures in a form prescribed by it.

6.  Grand Opening Advertising:  $5,500

• Due Date:  Between 1 week prior to opening and 8 weeks after opening.

• You must perform a grand opening of your Franchised Restaurant at time of beginning operations or if you relocate.

• You pay directly subject to Black Bear Diner’s approval. Payable to suppliers of advertising.

7.  Renewal Fee:  $5,000

• Due Date:  Upon signing renewal documents.

• Payable if you and Black Bear Diner elect to renew and enter into a Renewal Franchise Agreement.

8.  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%.

9.  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.

10.  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.

11.  Merchant and Gift Card Processing Fees:  approximately $75 per month, plus transaction fee ranging from approximately 4.7%-6%

• Due Date:  Monthly.

• This fee is imposed by Black Bear Diner but payable to an approved third-party supplier of processing services.

12.  Waitlist Management System:  approximately $35-$45 per month

• Due Date:  Monthly.

• This fee is imposed by Black Bear Diner but payable to an approved third-party supplier of waitlist and queue management services.

13.  Olo Online Digital Ordering System:  approximately $50 per month for basic service, plus monthly fee depending on order quantity package ranging from $5 for 10 monthly orders to $90 for 700 monthly orders. In addition, commission payable to approved delivery service providers typically ranges from approximately 20-30% of cost of order.

• Due Date:  Monthly.

• Black Bear Diner requires you to use an approved online ordering platform, currently Olo, and an approved delivery service. Costs vary depending on the service selected and your anticipated monthly online orders.

• Payable directly to service providers.

14.  Software License Fees:  approximately $200 to $400 depending on the modules you select

• Due Date:  Monthly.

• You are required to license and use software including Ctuit, Aloha, Connected Payments, and Playerlync software in the operation of your Restaurant. The license fees are payable to Black Bear Diner, who remits it to the software licensor.

15.  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.

16.  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.

17.  Transfer Fee:  $10,000

• Due Date:  Before transfer.

• This transfer fee does not apply to a transfer to an entity you own or control.

18.  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.

19.  Substitute General Manager Training:  $3,000

• Due Date:  At time of scheduling.

• If you hire a substitute General Manager, they must attend and satisfactorily complete the Initial Training Program.

20.  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 and any follow-up inspections resulting from a failed inspection.

21.  Reschedule of Scheduled Opening Date:  Black Bear Diner’s actual costs of rescheduling, which are estimated to range from $4,500 to $8,000

• Due Date:  At time of rescheduling.

• If your opening is rescheduled, you will pay all costs associated with rescheduling the team providing opening guidance and assistance, including airfare, lodging, and related travel charges.

22.  Failure to Attend Franchisee Convention:  $2,500

• Due Date:  Same as Royalty Fee.

• You are only required to pay this fee if you or your General Manager (or approved substitute) does not attend the Franchisee Convention.

23.  Failure to Attend General Manager Annual Training Meeting:  $1,500

• Due Date:  Same as Royalty Fee.

• You are only required to pay this fee if your managerial employees do not attend the General Manager Annual Training Meeting.

24.  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.

25.  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.