Considering a Primrose Schools Franchise? Don’t Overlook These 32 Important Franchise Fees

Updated September 9, 2020.

If you are considering a Primrose Schools franchise, don’t get blindsided by these 32 important franchise fees (from the initial franchise fee, to the royalty fee, to 30 other fees found in Items 5 and 6 of Primrose Schools’ 2020 FDD).

1.  Initial Franchise Fee:  $42,000 to $80,000

• The initial franchise fee for a Primrose Schools franchise (the “Initial Fee”) for a new franchisee for a new Facility is $80,000.

• If you are an existing franchisee that meets Primrose Schools’ qualifications, the Initial Fee for a new Facility will be $70,000.

• If you are purchasing an existing Facility from an existing franchisee and are approved by Primrose Schools to operate the Facility, the Initial Fee will be 60% of the then-current Initial Fee for existing franchisees purchasing a new Facility.

• Primrose Schools participates in the International Franchise Association’s VetFran program. If you are a qualifying veteran or member of the U.S. Armed Forces, the Initial Fee for your first Facility only will be $50,000.

2.  Real Estate Fees

a.  Real Estate Affiliate Development Program:  $70,000

• Under the Real Estate Development Agreement, your Real Estate Affiliate must pay Primrose Schools a real estate fee (the “Real Estate Fee”) equal to $70,000.

• The Real Estate Fee is payable in two installments, with a deposit (the “Real Estate Fee Deposit”) equal to $20,000 payable at the time of signing the Real Estate Development Agreement and the remaining $50,000 payable at the Closing.

b.  Build-to-Suit Program:  $25,000

• You will be responsible for paying Primrose Schools a Real Estate Fee of $25,000 upon signing the Franchise Agreement.

c.  Permanent Lease Program:  $70,000

• Under the Franchise Agreement, you must pay Primrose Schools a Real Estate Fee of $70,000.

• The Real Estate Fee is payable in two installments, with a Real Estate Fee Deposit equal to $20,000 payable at the time of signing the Franchise Agreement and the remaining $50,000 payable at the Closing.

d.  Independent Development Program:  $25,000

• If Primrose Schools authorizes you to develop the site for your Facility, you will pay it a Real Estate Fee of $25,000.

• The Real Estate Fee is payable at the time of signing the Franchise Agreement.

3.  Training Fees and Opening Support Fees:  $35,000

• You must also pay Primrose Schools an initial training and opening support services fee (the “Initial Training and Opening Support Fee”) of $35,000, which covers Initial Training and Opening Support (“ITOS”) services that Primrose Schools will provide.

• ITOS services include Primrose Schools’ initial training program (“Initial Training”) for up to two Owners and additional support services during the opening of your Facility.

• Primrose Schools may require or permit additional Owners to attend Initial Training for an additional fee of $3,500 per attendee.

• If Primrose Schools determines, in its sole discretion, that you have not satisfactorily completed any part of the required training, it has the right to terminate your Franchise Agreement and the Initial Training and Opening Support Fee deposit will be retained by it.

4.  Development Expenses:  Primrose Schools’ costs

• For the Real Estate Affiliate Development Program and Permanent Lease Program, you and your Real Estate Affiliate will also be responsible under the Franchise Agreement or Real Estate Development Agreement for reimbursing Primrose Schools for the expenses that it incurs related to the identification, development, and construction of the Site and the Facility (the “Development Expenses”), including, without limitation, expenses and fees incurred for engineering, environmental studies, soil samples, architectural fees, legal fees, or any and all other fees that Primrose Schools incurs in regard to the identification, investigation, review, and acceptance process (including any expenses Primrose Schools incurs reviewing documents relating to the lease or purchase of the premises for the Facility) and for services rendered on the site.

5.  National Architect Fee:  a fee of $8,000 for the release of prototype plans to you, and a fee of $2,500 to review your proposed plans, including subsequent change orders

• Primrose Schools may designate one or more architects to develop prototype plans for all facilities in the system and to review any adaptations of such plans for the Facility (the “National Architects”).

• Primrose Schools may require you to pay the National Architects, or Primrose Schools to pay to the National Architects on your behalf, (i) a fee of $8,000 for the release of prototype plans to you and (ii) a fee of $2,500 to review your proposed plans, including subsequent change orders.

• Currently, you must only pay the $8,000 fee if the current prototype plans have never been used in the state in which your Facility will be located, but this policy is subject to change.

6.  Rent Guarantee:  $15,000

• In limited and unique circumstances under the Build-to-Suit Program or Permanent Lease Program, Primrose Schools may provide a limited rent guarantee in favor of your independent third-party landlord specifically for the purposes of renting the real property, building, and improvements for the Facility from such party.

• If Primrose Schools elects to provide the guarantee, you will be required to pay Primrose Schools a non-refundable limited rent guarantee fee equal to 5% of the guarantee amount.

7.  Option Fees Under Option Addendum:  $30,000 for each Facility you obtain the option to develop under the Option Addendum

• The total amount of the option fee varies based on the number of Facilities you obtain the option to develop.

• If you sign an Option Addendum, you must pay an option fee equal to $30,000 for each Facility you obtain the option to develop under the Option Addendum.

• Each time you exercise an option for a Facility, you must pay Primrose Schools its then-current initial franchise fee minus the portion of the option fee paid for the option on the Facility.

8.  Grand Opening Marketing:  $40,000 minimum

• You must spend a minimum of $40,000 for grand opening advertising, including advertising and promotional activities that you will conduct prior to operating your Facility.

• Primrose Schools may require you to deposit with it up to the full $40,000 for grand opening advertising at a specified time prior to the date the Facility opens (the “Opening Date”), and Primrose Schools will spend such money on pre-opening marketing on your behalf.

9.  Continuing Services and Royalty Fee (the “Royalty Fee”):  7% of Gross Revenues

• Due Date:  Payable monthly on the 10th day of the next month.

10.  Primrose Brand Fund Fee (the “Brand Fund Fee”):  currently, 2% of Gross Revenues, but may be increased by Primrose Schools at any time, but not more than a total of 3% of Gross Revenues

• Due Date:  Payable monthly on the 10th day of the next month.

• Used to contribute to the Primrose Brand Fund (the “Brand Fund”).

11.  Local Advertising:  1% of Gross Revenues for preceding month or $1,000, whichever is greater

• Due Date:  Payable as incurred.

• You must spend this amount each month on approved local community awareness, advertising, and public relations; and community involvement activities, sponsorships, business partnerships, and promotions in accordance with an annual marketing plan that you submit to Primrose Schools (“Approved Local Advertising”).

12.  Cooperative Contributions:  up to 1% of Gross Revenues for the previous month, unless otherwise agreed by members of the Cooperative

• Due Date:  Payable as defined by the Cooperative.

• Currently, market level business cooperatives (“Cooperatives”) have been established in Atlanta, Georgia; Raleigh-Durham, North Carolina; and Dallas, Texas, but Primrose Schools plans to launch them in more markets.

13.  Cognia Accreditation:  currently, $900

• Due Date:  Payable on demand.

• You must pay this amount each school year to maintain Cognia accreditation.

14.  Late Fee:  interest at 1.5% per month, plus a 5% late fee on past due amounts, along with NSF charges

• Due Date:  Payable on demand.

• Applies to all payments to be made by you to Primrose Schools.

15.  Transfer Fee:  for any Control Transfer, (i) you must pay a transfer fee of 40% of the then-current Initial Fee for existing franchisees purchasing a new Facility, plus all costs and expenses incurred by Primrose Schools, and (ii) your transferee must pay a non-refundable Initial Fee equal to 60% of the then-current Initial Fee for existing franchisees purchasing a new Facility. For a transfer that is not a Control Transfer, you must pay Primrose Schools’ then-current transfer fee for transfers that do not result in a Control Transfer (currently, $3,250 to add a new Owner and $1,250 to remove one).

• Due Date:  Payable at closing.

16.  Transfer Training Fee:  the transfer training fee is the same amount as Primrose Schools’ Initial Training and Opening Support Fee. Currently, this amount is $35,000.

• Due Date:  $5,000 must be paid at least 10 days prior to the Owners attending Initial Training, with the balance due at closing of the transfer.

• In the event that you transfer a Facility to an existing franchisee who meets certain previous training requirements, Primrose Schools may charge a reduced transfer training fee of $18,000.

17.  Successor Term Fee:  10% of the then-current Initial Fee for existing franchisees purchasing a new Facility

• Due Date:  Prior to the expiration of the initial term.

• Payable if you enter into a successor term.

18.  Successor Term Training Fee:  currently, the successor term training fee is $5,000, which covers training for two Owners

• Due Date:  Within one year (before or after) the expiration of the initial term.

• If more than two Owners are trained, you must pay an additional fee of $1,250 per additional Owner.

19.  Additional Training Fee:  Primrose Schools’ current hourly rate, plus all costs and expenses that Primrose Schools incurs (currently, $100 per hour for each trainer, not to exceed $750 per day for each trainer; subject to adjustment upon 30 days’ written notice)

• Due Date:  Payable when services are provided.

• Payable if Primrose Schools provides additional training to your existing or future employees.

20.  National Conference Registration Fee:  Primrose Schools’ current rate per attendee. Currently, the fee is $550 per attendee at the National Conference if the registration is made by a certain deadline, and $750 per attendee thereafter, but it is subject to change.

• Due Date:  Payable prior to the National Conference.

• Payable if Primrose Schools conducts an annual national conference.

21.  Training Programs Fee:   a fee that Primrose Schools may set for each training program, which will vary from program to program

• Due Date:  Payable when services are provided.

• Payable if your owners or representatives attend optional or mandatory refresher training programs, seminars, or workshops.

22.  Additional Consulting Services Fees:  a reasonable fee, currently up to $750 per day, plus travel and living expenses, including transportation, lodging, and meals

• Due Date:  Payable when services are provided.

• Primrose Schools may offer you consultation services beyond the support services under the Franchise Agreement, and if you accept them, Primrose Schools can charge you a consulting fee.

• If such services are provided on-site, then you must reimburse Primrose Schools for its representative’s travel and living expenses, including transportation, lodging, and meals.

23.  Temporary Management Fee:  Primrose’s current daily rate (currently, $750), plus all costs and expenses that Primrose Schools incurs

• Due Date:  Payable when services are provided.

• Payable if Primrose Schools opts to operate your franchise after you have defaulted under the Franchise Agreement and have failed to cure the default within 30 days, or if your On-Site Owner is absent, incapacitated, or deceased.

24.  Remedial Expense:  all costs and expenses that Primrose Schools incurs

• Due Date:  Payable upon demand.

• Payable if you fail to correct any maintenance issues that Primrose Schools identifies within 30 days, and Primrose Schools, in its sole discretion, enters the Facility to make such repairs or improvements.

25.  Follow-up Inspection Fee:  all costs and expenses that Primrose Schools incurs

• Due Date:  Payable upon demand.

• Payable if Primrose Schools performs a follow-up inspection to review any corrective actions you take to cure deficiencies.

26.  Product, Service, or Supplier Review Fee:  Primrose Schools’ current daily rate (currently, $750), plus all costs and expenses that Primrose Schools incurs testing or reviewing such items or suppliers

• Due Date:  Payable upon demand.

• Payable if you propose to use any Goods, or to purchase from any suppliers, that Primrose Schools has not approved.

27.  ACH Fees:  amount of Primrose Schools’ expenses

• Due Date:  Payable monthly on the 10th day of the next month.

• Royalty Fees and Brand Fund Fees will be collected via Automated Clearing House on the 10th of each month and on the 20th of each month (or, if necessary, the next business day after such date) for Franchisees with outstanding Notes due to Primrose Schools.

• Other amounts will be collected via ACH as they come due.

28.  Indemnification:  Primrose Schools’ losses, costs, expenses (including attorneys’ fees), and damages

• Due Date:  Payable on demand.

• Payable if Primrose Schools incurs losses due to your operation of the business and the Facility, your breach of any agreement with Primrose Schools or its affiliates, or the acts or failures of your employees.

29.  Damages Upon Expiration or Termination:  Primrose Schools’ damages, costs, and expenses (including, without limitation, lost future royalties and reasonable attorneys’ fees)

• Due Date:  Payable on demand.

• Payable if (i) Primrose Schools terminates the Franchise Agreement due to your default and it incurs damages or expenses due to such termination or (ii) it incurs damages or expenses related to your failure to adhere to post-termination or expiration covenants.

30.  Facility Expansion Fee:  $10,000

• Due Date:  Payable upon Primrose Schools’ approval of your request.

• If Primrose Schools does not approve your expansion request, your payment of $10,000 will be refunded.

• Payable if you would like to expand the size of the Facility.

31.  Relocation Fee:  Primrose Schools’ actual costs and expenses, plus any other development fees that would be charged to develop a new Facility

• Due Date:  Payable on demand.

• Payable if you relocate the Facility to a new site.

32.  Academic Curriculum Material License Fee:  $450 to $480 per certain specified classrooms as specified annually, plus $1,400 to $1,600 per school annually

• Due Date:  Payable on demand.

• If Primrose Schools requires you to license academic curriculum materials from it or its affiliates, it may require you to pay a reasonable license fee for such materials, which may vary based on the materials licensed.

• Primrose reserves the right to change this fee.