If you are considering a Kiddie Academy franchise, don’t get blindsided by these 21 important franchise fees (from the initial franchise fee, to the royalty fee, to 19 other fees found in Items 5 and 6 of Kiddie Academy’s 2016 FDD).
1. Initial Fees: $50,000 to $120,000
- The initial fees are $120,000.
- You will pay Kiddie Academy a fee of $20,000 when you enter into a Preliminary Agreement. This payment is non-refundable, except as described below.
- You will pay Kiddie Academy a fee of $100,000 when you enter into a Franchise Agreement, which is payable in installments. All payments are non-refundable.
- The amount of $50,000 is due when you sign the Franchise Agreement. The amount of $30,000 is due when the building permit or other certificate or permit authorizing construction of the Franchised Business is issued or the actual commencement of construction, whichever occurs first. The amount of $20,000 is due when your loan has been funded or when you receive your certificate of occupancy, whichever occurs first.
- You may only enter into a Franchise Agreement after you have entered into a Preliminary Agreement.
- Kiddie Academy will provide you a partial refund if your Preliminary Agreement expires and you request it, or if you request that your Preliminary Agreement be terminated before you sign a lease or purchase contract for your Kiddie Academy Franchise.
- If the Preliminary Agreement is terminated or expires, Kiddie Academy will retain half of the amount you paid (whether this was the full amount or through some reduced fee program, further described below) as fully earned and for lost opportunity costs, and it will refund to you the remaining half, after deducting all expenses it incurred in connection with the Preliminary Agreement and assisting you in your site selection process.
- Kiddie Academy also has the right to terminate the Preliminary Agreement at any time before it signs your Franchise Agreement. If Kiddie Academy terminates the Preliminary Agreement in this manner within one year of its effective date, it will refund to you the entire amount you paid to it (whether this was the full amount or through some reduced fee program, further described below).
- If the Preliminary Agreement is for a term greater than one year, or if it is extended for more than one year (either an automatic extension after the first year, or extended by further agreement), and if Kiddie Academy terminates the Preliminary Agreement in this manner after one year of its effective date, Kiddie Academy will retain half of the fee as fully earned and for lost opportunity costs, and it will refund to you the remaining half, after deducting all expenses it incurred in connection with the Preliminary Agreement and assisting you in your site selection process.
- Kiddie Academy permits existing, qualified, and approved Franchisees who are in good standing with Kiddie Academy to acquire additional franchises at reduced initial fees. If you are approved to participate in this program, the initial fees will be reduced from $120,000 to $65,000.
- Kiddie Academy permits new, qualified, and approved franchise Applicants who wish to acquire two or more Kiddie Academy Franchises when they initially become franchise applicants to enter into additional Preliminary Agreements immediately and pay discounted initial fees for the additional Kiddie Academy Franchise(s).
- In every instance, the approved Applicant must sign a Preliminary Agreement for each Kiddie Academy Franchise, and pay the full amount of initial fees with respect to the first Franchised Business. For each additional Preliminary Agreement, the initial fees are reduced to $50,000. You will pay Kiddie Academy a fee of $10,000 upon signing each additional Preliminary Agreement. You will pay $40,000 upon signing each additional Franchise Agreement after the first one, which is payable in installments.
- Kiddie Academy is a member of the International Franchise Association’s IFA and proudly participates in the IFA’s VetFran program. In an effort to encourage current and former military personnel to become members of the Kiddie Academy franchise community, Kiddie Academy offers American citizens currently serving in the United States military and American citizens who have been honorably discharged from the United States military, discounted initial fees of $95,000. These individuals pay $20,000 upon signing the Preliminary Agreement. If you are an approved VetFran program participant, you will pay a reduced fee of $75,000 when you enter into a Franchise Agreement, which is payable in installments.
- As its brand grows, Kiddie Academy periodically targets key markets where there are not yet any Kiddie Academy Franchises already operating or in development. For those markets, Kiddie Academy offers discounted initial fees of $95,000. The qualified applicant pays $20,000 upon signing the Preliminary Agreement. If you are an approved First In Market program participant, you will pay a reduced fee in the amount of $75,000 when you enter into a Franchise Agreement, which is payable in installments.
- Kiddie Academy offers to each new, qualified applicant who signs a Preliminary Agreement during the scheduled Orientation Day a 50% reduction in the Royalty rate (3.5% of gross revenues instead of 7.0% of gross revenues) for the first six months after the Franchised Business opens.
2. Royalties: 7% of Gross Revenues
- Due Date: On Monday each week, on revenues generated during the week that ended 9 days earlier.
- Gross Revenues include all revenues generated from the provision of any and all services and/or the sale of any and all products and, whether by the Franchisee or a third-party provider, that relate to or arise from the Franchised Business. It does not include taxes collected from customers.
- Royalty payments are sent by automatic electronic bank transfer from your bank to Kiddie Academy’s account at the bank it designates.
3. Brand Building Fund: 2% of Gross Revenues
- Due Date: On Monday each week, on revenues generated during the week that ended 9 days earlier.
- Brand Building Fund payments are sent by automatic electronic bank transfer from your bank to an account at the bank Kiddie Academy designates, on a weekly basis, in the same manner as your Royalties.
4. Right to Audit for Revenue Compliance: if an audit reveals underpayments, you pay the amount of underpayments, plus interest on amounts owed to Kiddie Academy at 2% above the prime rate, or the maximum rate permitted by law, whichever is less. If underpayments of more than 3% are discovered, in addition to the amounts stated above, you pay the cost of the audit or $10,000, whichever is greater, plus an amount that is equal to 10% of the amount owed. If an audit is conducted as a result of Franchisee’s failure to supply required records, after default, you pay the cost of the audit.
- Due Date: Immediately upon receipt of audit report.
- All amounts are payable by you to Kiddie Academy via electronic bank transfer.
- Interest begins from date of the underpayment.
5. Failure to Comply with Reporting and Records Requirements: $500 for each failure to comply
- Due Date: Payable immediately.
- All amounts are payable by you to Kiddie Academy via electronic bank transfer.
6. Relocation of Kiddie Academy Franchise: $30,000
- Due Date: Payable on the date your Franchised Business opens at its new location.
- Payable to Kiddie Academy when you relocate your Kiddie Academy Franchise to another site.
7. Transfer (sale of your assets of the Franchised Business): $25,000
- Due Date: Payable on the date the transfer of your Franchised Business becomes effective.
- Payable to Kiddie Academy by you when you transfer the rights under your Franchise Agreement as described below. There is no fee due Kiddie Academy when you personally transfer your franchise to a corporation or other entity you control.
8. Administrative Fee From Transferee (sale of business): 10% of gross sales price of Franchised Business or $3,000, whichever is less
- Due Date: Payable by the applicant/acquirer on the date of transfer.
- Payable to Kiddie Academy by the new franchisee/acquirer when you transfer your franchise to a new Kiddie Academy franchisee.
9. Referral Fee (sale of business): 6% of gross selling price of business or $10,000, whichever is greater
- Due Date: Payable on the date of the transfer.
- Payable if Kiddie Academy helps obtain the purchaser for your business, including if the purchaser is a current franchisee or franchisee’s employee.
10. Interest on Late Payments: maximum rate allowed by law or, in the absence of such a rate, 1.5% per month
- Due Date: Payable simultaneously with all amounts that are late.
- Interest on late payments for all amounts due, until the obligation is paid in full.
11. Franchisee Training (at Franchisor’s corporate office): one training for all Franchisees is included
- Due Date: Included.
- You will be responsible for all of your travel and living expenses attending Kiddie Academy’s 5-day training course.
- Kiddie Academy reserves the right to charge a fee for each additional training program provided at its corporate office.
12. Director Training (at Franchisor’s corporate office): one training per year is included
- Due Date: Included.
- You will be responsible for all travel and living expenses of your Academy’s Director while he/she attends Kiddie Academy’s 5-day training course.
- Kiddie Academy reserves the right to charge a fee for each additional Director training program (in a given year) provided at its corporate office provided in a given year.
13. Background Check Fee: criminal background and credit checks are included
- Due Date: Included.
- You must authorize Kiddie Academy to conduct the criminal background and credit checks, but no additional fee is charged to you for these checks.
14. Site Selection Fee: Kiddie Academy’s costs for calls, travel, meetings, and research are included in the other fees
- Due Date: Included.
- You are responsible for any costs you incur related to Site Selection.
15. Franchise Renewal Fee: 10% of Kiddie Academy’s then-current Initial Franchise Fee for the renewal term
- Due Date: Before commencement of renewal term.
- You must sign Kiddie Academy’s then-current Franchise Agreement at the time of your renewal, payable by you to Kiddie Academy via electronic bank transfer.
16. Temporary Service Fee: $1,000 per day plus Kiddie Academy’s travel expenses, lodging, and other reasonable expenses, until default is cured and you are able to manage Academy based upon Kiddie Academy’s requirements
- Due Date: Within 7 days of Kiddie Academy’s invoice.
- Kiddie Academy may take over the operations of your Academy if you refuse or are unable to cure a default under your Franchise Agreement and Kiddie Academy determines not to immediately terminate your franchise as a result of your default.
17. Fees/Interest for Failure to Repair Academy: 15% of Kiddie Academy’s total aggregate expenses if it incurs an administrative fee
- Due Date: Within 7 days of Kiddie Academy’s invoice.
- Payable if Kiddie Academy performs refurbishment of your Franchised Business.
- All amounts are payable by you to Kiddie Academy via electronic bank transfer.
18. Late Charge on Late Payments: 10% of amount of each late payment, plus interest at the legal rate
- Due Date: Payable simultaneously with late payment.
- A late charge will be applied to all sums that are not paid in full when due. Interest begins from the date of the underpayment.
19. Annual Franchisee Conference (every other year): reasonable registration/attendance fee, even if you do not attend
- Due Date: Payable before conference.
- 2016 Fee is $350 per person. You must also pay all travel related expenses, including food, lodging, payroll, and transportation.
20. Replacement of Manuals: $500 per volume replaced, if replaced in hard copy by Franchisor. No charge by Franchisor if replaced by Franchisee utilizing online access to manuals.
- Due Date: Payable upon replacement.
- All amounts are payable by you to Kiddie Academy via electronic bank transfer.
21. Liquidated Damages: 156 weeks of royalty fees and Brand Building Fund fees
- Due Date: Payable upon termination.
- If the Franchise Agreement is terminated before the end of its term, you must pay Kiddie Academy liquidated damages for its lost future royalty fees and Brand Building Fund fees, calculated as the average weekly amount of those fees multiplied by 156 weeks (or the number of weeks remaining in the term, if shorter).
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