Considering an Honest-1 Auto Care Franchise? Don’t Overlook These 22 Important Franchise Fees

If you are considering an Honest-1 Auto Care franchise, don’t get blindsided by these 22 important franchise fees (from the initial franchise fee, to the royalty fee, to 20 other fees found in Items 5 and 6 of Honest-1 Auto Care’s 2016 FDD).

1.  Initial Franchise Fee:  $10,000 to $115,000

• You must pay Honest-1 Auto Care an initial franchise fee depending on the number of franchise Centers you agree to open. The initial franchise fee is non-refundable. If you are eligible for multiple discounts, only one discount will be granted to you.

• One Center Franchisee:  If you are granted the right to open one Honest-1 Auto Care Center, then you will pay an initial franchise fee of $35,000.

• Veteran Franchisee:  If you are a qualified United States Veteran, Honest-1 Auto Care will discount the initial franchise fee by $5,000.

• Existing Franchisee:  If you purchase two or more franchises while you are an Honest-1 Auto Care franchisee, the initial franchise fee will be reduced by 15% off the then-current initial fee for one Center and the same reduction will apply for each additional franchise purchased by you. At the current initial franchise fee of $35,000, the franchise fee for the second and additional locations would be $29,750.

• 3-Pack Franchisee:  Honest-1 Auto Care offers a package of the right to operate three franchises at a reduced initial franchise fee of $75,000 (“3-Pack”). You will execute a Franchise Agreement for the first location, pay the entire initial franchisee fee, and execute the Attachment I Multi-Store Amendment, which will state the development schedule for each Center and the area in which the franchises are to be located.

• 5-Pack Franchisee:  Honest-1 Auto Care also offers a package of the right to operate five franchises at a reduced initial franchise fee of $115,000 (“5-Pack”). You will execute a Franchise Agreement for the first location, pay the entire initial franchisee fee, and execute the Attachment I Multi-Store Amendment, which will state the development schedule for each Center and the area in which the franchises are to be located.

• You will execute the Franchise Agreement for the first location and then execute the remaining Franchise Agreements each time that you begin to look for the next site.

• In order to be approved to open another Franchised Business, you must be in good standing for all your Centers, you must meet Honest-1 Auto Care’s current financial qualifications for multi-store operators (“MSA Franchisees”), including sufficient cash flow from your currently operating Centers and you must have sufficiently addressed any requirements under any “action plan” developed from an operational review of your operating Centers.

• Conversion Franchisee:  If you convert an existing automotive repair facility to an Honest-1 Auto Care Center, the initial franchise fee may be discounted by $10,000 to $25,000. Honest-1 Auto Care may assist you in converting the automotive repair facility to an Honest-1 Auto Care Center by reimbursing you for certain costs associated with the conversion.

• To qualify for the conversion program, you must own and operate an existing automotive repair facility. If you are an existing Honest-1 Auto Care franchisee and you purchase an operating automotive repair facility to be converted to an Honest-1 Auto Care Center, it does not qualify for the conversion program.

2.  Coaching Fee:  $4,000

• You must pay a coaching fee for up to four weeks of onsite initial coaching for your first Center. Honest-1 Auto Care currently is the only approved vendor for the onsite coaching.

• The fee for the initial coaching program is $4,000 and must be paid at the time a location is fully secured, which is typically when the lease is signed or the property is purchased. The coaching will be for up to two weeks prior to the opening of your Honest-1 Auto Care Center and up to two weeks after opening.

3.  Royalty – Standard Franchise:  6% of weekly gross sales; 2% of weekly gross sales on tires and batteries only throughout the term of your franchise, however related labor is subject to the standard royalty fee

• Due Date:  Payable weekly on Monday.

• Late fee of $10 per day for each day of nonpayment of Royalty and $10 per day for each day a completed Royalty report is not submitted.

• Gross Sales includes the sale of all products and services sold at your Center, less certain taxes and discounts to customers.

• Honest-1 Auto Care will collect your Royalties via electronic funds transfer.

4.  Royalty – Conversion Franchise:  2% of weekly gross sales for the first 12 months of operation; 4% of weekly gross sales for the second 12 months of operation; then 6% of weekly gross sales for the remaining term

• Due Date:  Payable weekly on Monday.

• Late fee of $10 per day for each day of nonpayment of Royalty and $10 per day for each day a completed Royalty report is not submitted.

5.  National/Regional Advertising:   1% of weekly gross sales

• Due Date:  Payable weekly on Monday.

• Collected by Honest-1 Auto Care and is non-refundable; Honest-1 Auto Care will collect your advertising contribution via electronic funds transfer.

• Honest-1 Auto Care has the ability to increase this contribution to a maximum of 2%.

6.  Local Advertising:  $4,000 a month minimum; recommended is $6,000 to $15,000 a month; average is $8,000 to $10,000 a month

• Due Date:  To be spent weekly by you.

• You must provide proof of placements to Honest-1 Auto Care. All advertising you propose to use must be pre-approved by Honest-1 Auto Care.

7.  Advertising Cooperative:  between 1% and 3% of gross sales

• Due Date:  As determined by the cooperative.

• Cooperatives may be formed where there are at least two Centers in a specific area. Your contributions to a cooperative will count toward your local advertising requirement.

8.  Extension Fee:  $2,750

• Due Date:  Upon request for development extension.

• You may request a one-time extension in your development obligations.

9.  Transfer/Training:  $12,500

• Due Date:  Upon request for approval of the transfer of the Franchise Agreement, if applicable.

• Collected by Honest-1 Auto Care and is non-refundable; this applies if you are a franchise owner; transfers permitted to family members meeting Honest-1 Auto Care’s criteria.

10.  Refresher Training (Franchise Agreement):  no charge

• For refresher training, you pay your own expenses.

11.  Reimbursement of Expenses for Inspection:  actual costs

• Due Date:  15 days after billing.

• If you fail to maintain Honest-1 Auto Care’s standards and it has to inspect your location to verify your compliance, you must pay for its out of pocket costs.

12.  Multi-Store Operators:  then-current training fees (estimated to be $150 to $1,500)

• Due Date:  Upon registration for training.

• Honest-1 Auto Care may hold training for operators of multi-stores and it may or may not charge a fee for such training.

13.  Renewal (Franchise Agreement):  25% of then-current initial franchise fee

• Due Date:  Upon renewal.

14.  Audit:  cost of inspection or audit plus any deficiencies found

• Due Date:  15 days after billing.

• Payable only if you fail to furnish reports, supporting records, or other required information, or if audit finds discrepancy of 2% or more.

15.  Late Fees:  $10 per day

• Due Date:  Upon demand.

16.  Interest:  lesser of 2% above prime or highest contract rate of interest allowed by law

• Due Date:  15 days after billing.

• Payable on all overdue amounts paid for advertising only.

17.  Costs and Attorneys’ Fees:  will vary under circumstances

• Due Date:  As incurred.

• Payable upon your failure to comply with your Agreement with Honest-1 Auto Care.

18.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You have to reimburse Honest-1 Auto Care if it is held liable for claims arising from your Center’s operations.

19.  Relocation Expenses:  costs of relocation

• Due Date:  15 days after billing.

• This covers the cost Honest-1 Auto Care incurs if you want to relocate the Center.

20.  Income Taxes:  in addition to monthly Royalty fees, Honest-1 Auto Care has the right to collect from you the cost of all income taxes, sales taxes, and other taxes arising as a result of Honest-1 Auto Care’s licensing of intellectual property to you in the state where your franchise is located, as well as any assessment on the Royalty fees, advertising contributions, and any other income Honest-1 Auto Care receives from you.

• Due Date:  Payable monthly with Royalty fees.

• Only imposed if state collects these taxes or assessments.

21.  Liquidated Damages:  see formula below

• If Honest-1 Auto Care terminates the Franchise Agreement as a result of your material breach of the Franchise Agreement after your failure to correct any curable defaults, you must pay Honest-1 Auto Care liquidated damages equal to the average monthly Royalties you paid or owed to it during the most recent 12 months of operation before the termination, multiplied by (a) 24 (the number of months in two full years) or (b) the number of months remaining in the Franchise Agreement had Honest-1 Auto Care not terminated it, whichever is less.

22.  Software Maintenance:  $325

• Due Date:  Monthly cost.

• Paid directly to computer vendor (Protractor).