If you are considering a Primrose Schools franchise, don’t get blindsided by these 28 important franchise fees (from the initial franchise fee, to the royalty fee, to 26 other fees found in Items 5 and 6 of Primrose Schools’ 2016 FDD).
1. Initial Franchise Fee: $45,000 to $70,000
- The initial franchise fee for a Primrose Schools franchise (the “Initial Fee”) for a new franchisee for a new Facility is $70,000.
- If you are an existing franchisee that meets Primrose Schools’ qualifications, the Initial Fee for a new Facility will be $65,000.
- If you are purchasing an existing Facility from an existing franchisee and are approved by Primrose Schools to operate the Facility as a Primrose franchisee, the Initial Fee will be $45,000.
- 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. Training Fees and Opening Support Fees: $30,000
- You must also pay Primrose Schools an initial training and opening support services fee (the “Initial Training and Opening Support Fee”) of $30,000, 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 $2,500 per attendee, if they only attend the first five days of Initial Training classes (the “Franchise Management Training”), or $3,500 per attendee, if they attend all of Initial Training.
- 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.
3. Real Estate Fees
a. Real Estate Affiliate Development Program: $49,500
- Under the Real Estate Development Agreement, your Real Estate Affiliate must pay Primrose Schools a real estate fee (the “Real Estate Fee”) equal to $49,500.
- The Real Estate Fee is payable in two installments, with a deposit (the “Real Estate Fee Deposit”) equal to $19,500 payable at the time of signing the Real Estate Development Agreement and the remaining $30,000 payable at the Closing.
- The Real Estate Fee is uniform to all franchisees that sign the Real Estate Development Agreement.
b. Developer Lease Program: $49,500
- You and your Approved Developer will be responsible for paying Primrose Schools a non-refundable Real Estate Fee of $49,500.
- The Real Estate Fee is payable in two installments, with a Real Estate Deposit equal to $19,500 payable by you at the time of signing the Developer Agreement and the remaining $30,000 payable by your Approved Developer at the Closing.
- The Real Estate Fee is uniform to all franchisees that sign the Developer Agreement under the Developer Lease Program.
c. Build-to-Suit Program: $19,500
- You will be responsible for paying Primrose Schools a non-refundable Real Estate Fee of $19,500 upon signing the Franchise Agreement.
- The Real Estate Fee is uniform to all franchisees that sign the Franchise Agreement under the Build-to-Suit Program.
d. Permanent Lease Program: $49,500
- Under the Franchise Agreement, you must pay Primrose Schools the Real Estate Fee of $49,500.
- The Real Estate Fee is payable in two installments, with a Real Estate Fee Deposit equal to $19,500 payable at the time of signing the Franchise Agreement and the remaining $30,000 payable upon soft cost closing.
- The Real Estate Fee is uniform to all franchisees that sign the Franchise Agreement under the Permanent Lease Program.
e. Independent Development Program: $25,000
- If Primrose Schools authorizes you to develop the site for your Facility, you will pay it a non-refundable Real Estate Fee of $25,000.
- The Real Estate Fee is payable at the time of signing the Franchise Agreement.
- The Real Estate Fee is uniform to all franchisees that sign the Franchise Agreement under the Independent Development Program.
4. Development Expenses: Primrose Schools’ costs
- For all programs other than the Independent Development Program, you and your Real Estate Affiliate or Approved Developer will also be responsible under the Franchise Agreement, Real Estate Development Agreement, or Developer Agreement (as applicable) 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 and for services rendered on the site.
5. Security Deposit: $100,000
- If you participate in the Developer Lease Program, upon signing the Developer Agreement, you must also provide Primrose Schools with a security deposit through one of the following options: (i) an irrevocable assignment of a certificate of deposit in favor of the Approved Developer in the amount of $100,000; (ii) establishment of an irrevocable letter of credit in the amount of $100,000; or (iii) a cash deposit in the amount of $100,000 (collectively, the “Security Deposit”).
6. Rent Guarantee: $15,000
- In limited and unique circumstances under the Developer Lease Program, Build-to-Suit Program, and Permanent Lease Program (collectively, the “Lease Programs”), Primrose Schools may provide a limited rent guarantee in favor of your Approved Developer or 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 it a $15,000 non-refundable limited rent guarantee fee.
7. Option Fees Under Option Addendum: $20,000 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 $20,000 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. Continuing Services and Royalty Fee (the “Royalty Fee”): 7% of Gross Revenues
- Due Date: Payable monthly on the 10th day of the next month.
9. Advertising and Development 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 Advertising and Development Fund (the “Brand Fund Fee”).
10. 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”).
11. Cooperative Advertising: up to 1% of Gross Revenues, unless otherwise agreed by members of the cooperative
- Due Date: Payable as defined by the cooperative advertising group.
- Currently, cooperatives have been established in Atlanta, Georgia; Raleigh-Durham, North Carolina; Dallas, Texas; Houston, Texas; and Denver, Colorado.
12. AdvancEd Accreditation: $750
- Due Date: Payable on demand.
- You must pay this amount each school year to maintain AdvancEd accreditation.
13. Late Fee: interest at 1.5% per month, plus a 5% late fee on past due amounts
- Due Date: Payable on demand.
- Applies to all payments to be made by you to Primrose Schools.
14. Transfer Fee: for any transfer, you must pay $25,000, plus all costs and expenses incurred by Primrose Schools. If it is a transfer of a controlling interest, your transferee must also pay a non-refundable Initial Fee equal to $45,000.
- Due Date: Payable at closing.
- Applies to a sale or transfer of the franchise, an interest in the Franchise Agreement, or an interest in any entity with an interest in the Franchise.
15. Transfer Referral Fee: $35,000
- Due Date: At closing of the Transfer.
- You may engage Primrose Schools to assist you in identifying qualified persons who may be interested in purchasing your Facility.
- If you engage Primrose Schools, you must sign a Transfer Referral Fee Agreement and pay this fee.
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 $30,000.
- 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 Franchise Fee
- 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 $2,500, 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 rate, plus all costs and expenses that Primrose Schools incurs (currently, $100 per hour for each trainer, not to exceed $500 per day for each trainer; subject to adjustment upon 30 days’ written notice)
- Due Date: Payable when services are provided.
- Payable if Primrose Schools requires your Owners, managers, directors, or other employees to attend additional training, which may not occur more than twice per year and may not exceed ten days in duration.
20. Service Fee: Primrose’s current daily rate (currently, $500), 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.
21. Lease/Purchase Document Review Fee: amount of Primrose Schools’ costs and expenses
- Due Date: Payable when services are provided.
- Required if Primrose Schools or its affiliates or agents review any documents relating to the lease or purchase of the premises for your Facility.
22. Reimbursements: amount of Primrose Schools’ costs and expenses
- Due Date: Payable on demand.
23. Miscellaneous Service Fees: Primrose Schools’ current daily rate (currently, $500 per day) or hourly rate, as agreed to
- Due Date: Payable on demand.
24. ACH Fees: amount of Primrose Schools’ expenses
- Due Date: Payable monthly on the 10th day of the next month.
- Royalty Fees and Advertising 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.
25. 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.
26. 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.
27. Facility Expansion: one-time lump sum payment of $10,000
- Due Date: Payable upon submission of the request for the expansion.
- If Primrose Schools does not approve your expansion request, your payment of $10,000 will be refunded.
28. Educational Material License Fee: beginning in September 2016, $450 – $480 per certain specified classrooms as specified annually (prorated for the remainder of 2016)
- Due Date: Payable on demand.
- If Primrose Schools requires you to license educational 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.
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