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Considering a Wetzel’s Pretzels Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on February 25, 2017

in Franchise Fees, Pretzel Franchise

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This post was updated on July 16, 2017 to reflect information from Wetzel’s Pretzels’ 2017 FDD.

If you are considering a Wetzel’s Pretzels franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of Wetzel’s Pretzels’ 2017 FDD).

1.  Option Fee:  $5,000

  • If you enter into an Option Agreement with Wetzel’s Pretzels, in return for an exclusive one-year option to enter into a Franchise Agreement and assume Wetzel’s Pretzels position in lease negotiation and store development for a site in a specific mall, you must pay Wetzel’s Pretzels an option fee of $5,000.
  • If you enter into a Franchise Agreement for the site, the option fee is fully applicable to the initial franchise fee (also fully applicable to initial franchise fee on additional Bakery).
  • If you do not sign the Franchise Agreement within one week after expiration of any applicable disclosure period under state or federal franchise law, Wetzel’s Pretzels may grant the franchise for that location to another prospective franchisee or may proceed to develop the site itself.
  • The option fee is uniform to all franchisees that purchase options. It is not refundable.

2.  Initial Franchise Fee:  $22,500 to $35,000

  • When you sign a Franchise Agreement, you will pay Wetzel’s Pretzels the initial franchise fee in cash or other form of payment that will make the funds immediately available to Wetzel’s Pretzels (such as wire transfer or cashier’s check).
  • The initial franchise fee is $35,000. You must sign a separate Franchise Agreement for each franchise you purchase. The initial franchise fee for a second Bakery in the same mall location is $22,500.
  • This fee is generally uniform to all franchisees, except that Wetzel’s Pretzels may waive or reduce the initial franchise fee for appropriate business reasons, in its sole discretion. For example, Wetzel’s Pretzels is testing the viability of franchises operating from colleges, universities, and airports where the franchise fee and agreement terms may vary. Wetzel’s Pretzels reserves the right to change or withdraw these programs at any time.
  • In 2016, initial franchise fees ranged between $22,500 and $35,000.
  • In the past, Wetzel’s Pretzels has offered franchises at lower and varying initial franchise fees.

3.  Initial Development Fee:  $10,000 multiplied by the number of Wetzel’s Pretzels Bakeries (excluding the first Bakery) which you must open

  • When you sign Wetzel’s Pretzels’ current form of Multi-Unit Development Agreement, you must pay Wetzel’s Pretzels an initial development fee equal to $10,000 multiplied by the number of Wetzel’s Pretzels Bakeries (excluding the first Bakery) which you must open, plus $35,000 representing the initial franchise fee for your first Franchise Agreement.
  • When Wetzel’s Pretzels accepts the site for each Bakery, you will sign a separate Franchise Agreement and pay Wetzel’s Pretzels an initial franchise fee of $35,000 (or $22,500 for a second Bakery in the same mall).
  • However, Wetzel’s Pretzels will credit the development fee against the initial franchise fee (at the rate of $10,000 for the second and each subsequent Franchise Agreement until the development fee is exhausted).
  • If you signed a form of Multi-Unit Development Agreement which differs from the current form, your initial franchise fees will be determined in accordance with your Multi-Unit Development Agreement.
  • The development fee is fully earned by Wetzel’s Pretzels when paid, is uniform for franchises currently being offered in the state, and is not refundable under any circumstances.

4.  Lease Review Fee:  $1,850 to $2,000

  • When you sign a Franchise Agreement, you will reimburse Wetzel’s Pretzels for fees that it incurs for review of your lease which currently range between $1,850 and $5,000.

5.  Pre-Opening Purchases:  up to $1,500

  • Before opening, you will purchase items such as grand opening banners and balloons, pan liners, name tags, and job application forms from Wetzel’s Pretzels. The total cost of all such items is unlikely to exceed $1,500.

6.  Remote Mobile Unit Fee:  $5,000

  • If you and your landlord agree that you may operate a Remote Mobile Unit within the shopping mall or shopping center where your Bakery is located, Wetzel’s Pretzels will grant you a license to operate the Remote Mobile Unit under a Remote Mobile Unit Addendum.
  • The Remote Mobile Unit Fee, payable when you sign the Addendum, is $5,000.
  • This fee is not refundable, and is not necessarily uniform in all cases, as Wetzel’s Pretzels reserves the right to negotiate the amount of the fee in certain instances in its discretion.

7.  Deposit on Sublease:  two months’ rent

  • Upon occasion, Wetzel’s Pretzels must lease real property to secure a desirable location and sublease it to the franchisee because the landlord is reluctant to rent to the franchisee, with which the landlord is not familiar.
  • Wetzel’s Pretzels’ policy is to obtain a fully refundable deposit equal to two months’ rent when a franchisee leases from it. The amount is not uniform and the average amount of two months’ rent is $12,680.
  • In some cases, Wetzel’s Pretzels may also require you to obtain a letter of credit to secure your sublease, in an amount, on terms, and on a form it prescribes, from a bank acceptable to it.

8.  Royalties:  7% of Adjusted Gross Revenue

  • Due Date:  On Wednesday (or any other weekday designated by Wetzel’s Pretzels) of each week.
  • “Adjusted Gross Revenue” means the total amount of money received by you and your Related Parties for all goods sold and services rendered from the Approved Location or the Trade Name or Marks, less sales tax, returns, and discounts, within an accounting period.

9.  Advertising Fund Contributions:  1% of Adjusted Gross Revenue

  • Due Date:  On Wednesday (or any other weekday designated by Wetzel’s Pretzels) of each week

10.  Secret Shopper Fee:  $45 per shop

  • Due Date:  Monthly.
  • Reimburses Wetzel’s Pretzels for cost of service.

11.  Repeat Inspection Fee:  $500

  • Due Date:  On invoice.
  • Only assessed if previous inspection revealed material default.

12.  Bi-Annual Convention Registration:  $1,000, plus incidental costs to attend

  • Due Date:  Before convention.
  • Wetzel’s Pretzels will debit your account for this fee whether or not you attend.

13.  Ongoing Training Fees and Initial Training for New Managers:  cost, plus 20%

  • Due Date:  When class begins.

14.  Audit:  all expenses of audit, if underpayment exceeds 3% or if audit was undertaken because you did not submit annual financial statements in a timely manner

  • Due Date:  On invoice.
  • Wetzel’s Pretzels may audit your records at your place of business or require you to send copies of specified records to it at your own expense.
  • If the underpayment exceeds 3% of the money owed, Wetzel’s Pretzels may require that, from then on, your annual financial statements be audited and certified at your own expense.
  • Audit costs are not refundable.

15.  Relocation Fee:  $7,500

  • Due Date:  Before relocation.

16.  Renewal Fee:  50% of current initial fee; $2,000 for a 1-year extension

  • Due Date:  On signing new Franchise Agreement or an amendment in case of a 1-year extension.
  • For each and all stores, including remote Mobile Units.

17.  Transfer Fee:  $30,000 during the first 12 months, $15,000 from then on

  • Due Date:  With notice of intention to transfer.
  • Will be partially refunded if transfer is denied.

18.  Remote Mobile Unit Transfer Fee:  1/3 of current Remote Mobile Unit Fee

  • Due Date:  Before transfer completes.

19.  Interest on Late Payments:  lower of 18% per year or highest rate allowed by law

  • Due Date:  As accrued.
  • Compensation for loss of use of money.

20.  Base Rent:  monthly rent

  • Due Date:  Per your Sublease Agreement, if applicable; usually the first of each month.
  • Upon occasion, Wetzel’s Pretzels must lease real property to secure a desirable location and sublease it to the franchisee because the landlord is reluctant to rent to the franchisee.
  • The amount of your rent is not uniform and generally it is a pass through of the rent Wetzel’s Pretzels owes under the master lease, though Wetzel’s Pretzels reserves the right to mark-up the rent to account for its risks.

21.  Sublease Fee:  $200 monthly or as agreed by Parties, in addition to the Base Rent

  • Due Date:  As incurred.
  • The Sublease Fee compensates Wetzel’s Pretzels for administrative expenses.

22.  Late Fee for Financial Statements:  $100 per week per store

  • Due Date:  On invoice.
  • For failure to submit year-end Financial Statements according to the timeline communicated.

23.  Lease Renewal/Extension Assistance Fee:  reimburse the fees Wetzel’s Pretzels incurs up to $5,000

  • Due Date:  Due upon landlord execution of new lease.
  • Wetzel’s Pretzels must review terms of new lease. Fee is incurred only if lease is finalized.
  • In the event of a store sale or transfer, fee is responsibility of the buyer.

24.  Loyalty Program:  a scanner is required for each POS terminal and cost of each scanner is not expected to exceed $400. In addition, monthly service fees for Loyalty Program are currently up to $55 per store.

  • Due Date:  Scanner costs paid as incurred. Loyalty Program fees paid to Wetzel’s Pretzels or designated third party.

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