Considering a Children’s Lighthouse Learning Centers Franchise? Don’t Overlook These 18 Important Franchise Fees

This post was updated on December 11, 2017 to reflect information from Children’s Lighthouse Learning Centers’ 2017 FDD (Item 7).

If you are considering a Children’s Lighthouse Learning Centers 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 Children’s Lighthouse Learning Centers’ 2017 FDD).

1.  Initial Franchise Fee:  $35,000 to $70,000

• The initial franchise fee is $70,000. At the time you sign the Franchise Agreement, you must pay Children’s Lighthouse $35,000.

• At this time, the initial franchise fee for the second and third franchise awarded to qualified franchisees is $50,000. You must pay Children’s Lighthouse $15,000 at the time you sign the second and/or third Franchise Agreement.

• The initial franchise fee for franchises awarded to qualified franchisees beyond the third franchise will be $35,000. You must pay Children’s Lighthouse $10,000 at the time you sign each subsequent Franchise Agreement beyond your third franchise.

• The balance is due and payable on the date you acquire the site Children’s Lighthouse has approved for the Learning Center, or the date you close on your loan with your third-party lender, or the date upon which you obtain funding from investors that equals the amount needed to purchase the land for the Learning Center and/or construct the Learning Center, whichever occurs first.

• You will be eligible for a discount for additional franchises you are awarded in the future, if the Principals named in your first Franchise Agreement own at least 50% of the entity that will operate your second and/or subsequent Learning Centers.

• Children’s Lighthouse offers a military discount to veterans who have a certified DD214 issued by the U.S. Department of Defense. If you qualify for the military discount, Children’s Lighthouse will reduce by $25,000 the second half of the initial franchise fee due for the first Franchise Agreement entered into for the development of a new Learning Center.

2.  Administration Assistance Fee:  $10,000

• With regard to your first Learning Center, whether you elect to lease or purchase the premises, you must pay Children’s Lighthouse a $15,000 Administration Assistance Fee by no later than the date you close on your loan with your third-party lender, or the date upon which you obtain funding from investors that equals the amount needed to purchase the land for the Learning Center and/or construct the Learning Center, whichever occurs first.

• This fee is used, in part, to cover Children’s Lighthouse’s expenses for the assistance it, its affiliates, or third parties provide you during the development of your Learning Center and just prior to and during the initial opening of the Learning Center.

• The Administration Assistance Fee for the second and third franchise awarded is $10,000. The Administration Assistance Fee for any franchise awarded beyond your third Learning Center will be $7,500.

3.  Real Estate Fee:  $15,000

• You must pay Children’s Lighthouse a real estate fee of $15,000 for its proprietary, prototype architectural plans, access to its proprietary site selection counseling and assistance, and travel costs for site selection services no later than the date you purchase the land or sign a lease for the Learning Center, or the date you close on your loan, or no later than when you receive funding from other investors that equals the amount needed to purchase the land for the Learning Center and/or construct the Learning Center, whichever occurs first.

• At this time, the real estate fee for the second and third franchise awarded is $10,000. The real estate fee for any franchise awarded beyond your third Learning Center will be $5,000.

4.  Royalties:  7% of Gross Revenue

• Due Date:  Payable monthly on the 15th day of the month following the month earned, but no payment due until the start of the 9th month of operations or the month when enrollment reaches 100 children the first time, whichever is first.

• You will pay Royalties by electronic funds transfer.

• “Gross Revenue” includes all revenue earned on the cash basis of accounting directly or indirectly resulting from the operation of your Learning Center, including, but not limited to, income from sales, services, lease/rental payments, and barter (exchange of tuition for services or products and including tuition payments for staff children) as they are paid or earned.

• No deductions may be made from the calculation of Gross Revenue, except for the following which are not included in your Gross Revenue:  (a) uncollectible debts in the form of insufficient funds, (b) sales tax and other taxes lawfully collected by your Learning Center for transmittal to the appropriate taxing authorities, and (c) customer refunds only for the month the actual refund is made.

5.  Advertising Fund:  currently, $250 per month; Children’s Lighthouse can require you to contribute up to 2% of Gross Revenue to the Advertising Fund

• Due Date:  Payable monthly on the 15th day of the month following the month earned.

• You will contribute to the Advertising Fund by electronic funds transfer.

6.  Local Advertising:  1% of Gross Revenue

• Due Date:  Monthly.

7.  Advertising Cooperative:  presently none; if required, contribution in an amount Children’s Lighthouse establishes

• If Children’s Lighthouse forms an advertising cooperative, contributions will be credited to local advertising expenditure requirements.

8.  Non-Attendance Fee:  $500

• Due Date:  On demand.

• Unless Children’s Lighthouse excuses your attendance, you must pay a non-attendance fee if you fail, on more than one occasion in any one-year period, to attend a mandatory continuing education program.

• Children’s Lighthouse may offer local or regional continuing education programs on matters related to the operation or promotion of your Learning Center on a mandatory basis. There will be no charge for the programs, but you must pay all costs incurred by you or your employees while attending.

9.  Audit:  currently estimated between $2,000 and $5,000

• Due Date:  Immediately after audit.

• If an underpayment in excess of 3% is revealed, Children’s Lighthouse may charge you for all of its expenses related to the audit.

• If the underpayment exceeds 3%, Children’s Lighthouse may also require that all of your future annual financial statements be audited and certified at your own expense, unless your work papers and financial records are acceptable in form and substance to it and are available for inspection by it upon reasonable notice.

10.  Financial Reports Late Fee:  $1,000 upon occurrence, plus $100 per month until received

• Due Date:  On demand.

11.  Late Fee:  a late fee of 10% will be assessed on all past due accounts

• Due Date:  Payable when past due amount is paid.

12.  Remedial Training:  $500 a day, plus all expenses incurred by Children’s Lighthouse

• Due Date:  Payable when services are provided.

• This amount is required for each day Children’s Lighthouse spends at your Center, at your request, providing remedial training.

• Children’s Lighthouse would also charge this fee, plus other expenses it incurs, for each day it operates your Center as provided for in the Franchise Agreement.

13.  Software Fees and Upgrades:  actual cost of software, plus sales tax

• Due Date:  On demand.

• Made available to all franchisees as and when developed.

14.  Transfer Fee:  $25,000, plus all costs and expenses incurred by Children’s Lighthouse, including reasonable attorneys’ fees

• Due Date:  A non-refundable deposit of $5,000 is payable when you notify Children’s Lighthouse that you wish to sell your franchise. The remaining $20,000, plus all costs and expenses incurred by Children’s Lighthouse, including reasonable attorneys’ fees, is payable when the transaction closes.

• Applies to any sale or transfer of the franchise or Franchise Agreement.

15.  Insurance Premiums:  vary depending on location

• Due Date:  On demand if you have failed to pay premiums.

16.  Insurance Administrative Charge:  25% of expenses incurred by Children’s Lighthouse

• Due Date:  On demand.

• If you fail to purchase or maintain any required insurance, Children’s Lighthouse may do so at your expense.

• You must reimburse Children’s Lighthouse and pay an additional 25% as an administrative charge.

• Insurance coverage requirements are uniformly imposed on all franchisees, but the cost of coverage may not be uniform.

17.  Supplier Inspection and Testing Fee:  currently estimated between $500 and $1,500

• Due Date:  When billed.

• If you ask Children’s Lighthouse to approve an alternative product or supplier, it may require you to pay for the actual cost of inspection or testing.

18.  Enforcement Costs:  will vary

• Due Date:  As incurred.

• You must pay Children’s Lighthouse’s costs of enforcement (including attorneys’ fees and costs) if you do not comply with the Franchise Agreement.