If you are considering a Christian Brothers Automotive franchise, don’t get blindsided by these 12 important franchise fees (from the initial franchise fee, to the royalty fee, to 10 other fees found in Items 5 and 6 of Christian Brothers Automotive’s 2016 FDD).
1. Initial Franchise Fee: $112,500 to $125,000
- You pay Christian Brothers an initial franchise fee of $125,000. This initial franchise fee is paid in two installments.
- The first installment is in the amount of $75,000 and is due at the earlier of your signing the Franchise Agreement or your signing the Receipt and Acknowledgement Agreement.
- The second installment is in the amount of $50,000 and is due on or before three business days after Christian Brothers informs you in writing that the building permits have been obtained, the Land has been purchased, or the Land has been leased for the building where your franchise will operate. You may be able to include the second installment in your small business financing.
- If you are a current or former member of the United States Armed Forces and have been or will be honorably discharged, Christian Brothers offers you a discount of 10% off the initial franchise fee.
- Christian Brothers may not be able to purchase the Land that you have approved and Christian Brothers has agreed to attempt to acquire. Christian Brothers agrees to notify you in writing if it determines, for any reason, that it will not purchase the Land. It will then give you the option of either (a) choosing another location where Christian Brothers is willing to attempt to acquire the Land where your franchise will operate, or (b) having your Down Payment refunded to you.
- In the event a Termination Event occurs prior to Christian Brothers executing a Contract for the acquisition of the Land, then Christian Brothers will deduct the reasonable costs that it has incurred in processing your application, selecting the site for the franchise, and preparing to enter into the franchise relationship with you, and return any remainder to you, provided that such deduction will not exceed $25,000.
- “Termination Event” means any of the following (i) you do not qualify for the necessary financing to open and operate your franchise, (ii) you choose not to proceed with the decision to open a franchise on the Land, and/or (iii) you are unable to complete any of your other obligations that are conditions to your owning and operating a Christian Brothers franchise.
- “Contract” means a contract for (a) the acquisition of Land in the general area of the location, (b) the lease of Land in the general area of the location, or (c) a contract for the acquisition of an existing business.
- “Land” means the land that will be purchased or leased for the construction of a building and other improvements that will be used for the operation of your franchise.
- In the event a Termination Event occurs after Christian Brothers has executed a Contract but prior to it (a) submitting site plans to the appropriate authority for approval in connection with the purchase of the Land, or (b) performing due diligence in connection with the acquisition of the Land, then Christian Brothers will deduct $25,000 from your initial $75,000 deposit and refund $50,000 to you.
- In the event a Termination Event occurs after Christian Brothers has executed a Contract and either (a) has submitted site plans to the appropriate authority for approval in connection with the purchase of the Land, or (b) has performed due diligence in connection with the acquisition of the Land, then Christian Brothers will retain all of your initial $75,000 deposit.
2. Software and Equipment Purchases: approximately $50,150
- Prior to opening, you must purchase software from Christian Brothers that will be used to operate the franchise that includes point-of-sale and accounting software at a one-time current cost of approximately $8,400; QuickBooks, which includes a QuickBooks user license, “Accounting Link,” remote access, installation, and testing, at a current cost of approximately $1,250; and Challenger Lifts, which includes installation and testing, at a current cost of approximately $40,500.
- All of these fees for software and equipment purchases are refundable prior to store opening. These costs are included in your approved equipment list. Christian Brothers may add or delete items which must be purchased through it, and costs are subject to change.
3. Continuing Royalty Fees: 50% of monthly “Split Profits” during the initial franchise term and during all extensions and renewals
- Due Date: Estimated monthly amount due on the last day of each succeeding month.
- The Royalty Fee is based on the “Split Profits” for the previous month.
- Estimated payments will be due monthly and a final reconciliation will be calculated at each year-end for a “True Up” on the annual “Split Profits.”
- “Split Profits” mean gross revenues minus expenditures previously approved by Christian Brothers. Expenditures can include approved expenses, debt service, and/or other capital expenditures, which are approved in advance.
- Any salary or wage that your business pays to you and/or your spouse, as an employee of the franchise, is contingent upon the business making enough profit to pay such a salary or wage and is not a guarantee of payment by the franchisor. The franchisor allows up to $60,000 combined salary or wage to you and your spouse to be an approved expense.
4. Additional Training and Support Fees: established by Christian Brothers. Fees will be uniform for all franchisees.
- Due Date: Upon provision of services.
- Additional training may be offered off-site, and you will be responsible for all expenses related to
5. Administrative Fees: established by Christian Brothers
- Due Date: Monthly service is provided.
- Christian Brothers provides certain administrative services.
6. National Marketing Fees: established by Christian Brothers. Christian Brothers can require you to contribute up to $10,000 per year to the National Marketing Fund. Christian Brothers currently collects $5,000 per year.
- Due Date: 1st day of each month.
- Christian Brothers approves advertising and manages program.
7. Regional Marketing Groups: up to $10,000 per year to the Regional Marketing Group Fund
- Due Date: 1st day of each month.
- As of the date of the 2016 Disclosure Document, Christian Brothers has or will be establishing regional marketing groups. You must participate in any cooperative marketing program for the region in which your Automotive Repair Facility is located.
- If Christian Brothers operates an Automotive Repair Facility located in a region in which a regional marketing group has been established, it will participate in this regional marketing group on the same basis, with the same voting rights, as franchisees.
8. Transfer Fees: $30,000 ($2,500 Application Fee and $27,500 Transfer Fee)
- Due Date: At the time of application for transfer (for Application Fee); and if transfer is approved, on the approval date (for Transfer Fee).
- Transfer fees are imposed by and payable to Christian Brothers and are non-refundable.
9. Lease Payments: approximately $12,000 to $16,500 base rent per month, plus triple net costs. This will vary.
- Due Date: Base rent due on the 1st day of each month. Triple net costs are due as costs arise.
- You will lease or sublease the premises (Land and building) from Christian Brothers or one of its affiliates.
10. Additional IT Support Fees (if requested by you): $90-$150 per hour for services requested
- Due Date: Due upon receipt of invoice.
- If any IT work is requested from Christian Brothers after the initial setup of the store operations, Christian Brothers will bill you for the extra work requested at the agreed price then in effect.
11. Software and Related Annual Maintenance/License Fees: annual maintenance or license fees will apply for those programs and for additional required software programs. Annual maintenance or license fees for these programs are approximately $1,350-$1,400 and will vary depending on the underlying vendors’ current prices.
- Due Date: Maintenance/license fees are billed each calendar year in January and due in 10 days.
- Paid to Christian Brothers because it negotiates and purchases in bulk under more favorable terms in order to lower the cost to you.
- Currently all software is purchased from outside vendors.
12. Liquidated Damages: the full amount of the initial franchise fee, which is currently $125,000
- Due Date: At the time of franchise termination.
- If you fail to comply with your obligations under the Franchise Agreement, Christian Brothers is entitled to retain the full amount of the initial franchise fee as liquidated damages in the event of termination of your Franchise Agreement.
- You will also remain obligated to Christian Brothers for any obligations and damages which have accrued as of the date of termination of your Franchise Agreement.