Considering a LearningRx Franchise? Don’t Overlook These 25 Important Franchise Fees

Updated April 16, 2019.

If you are considering a LearningRx franchise, don’t get blindsided by these 25 important franchise fees (from the initial franchise fee, to the royalty fee, to 23 other fees found in Items 5 and 6 of LearningRx’s 2019 FDD).

1.  Initial Franchise Fee:  $17,000 to $25,000

• The initial franchise fee (“Initial Franchise Fee”) varies depending upon the size of the territory. You pay an Initial Franchise Fee based on the number of people residing in Franchisee’s territory.

• Franchisee must pay an Initial Franchise Fee of $17,000 for a micro franchise (“Micro Franchise”) (less than 100,000 people) and $25,000 for a standard franchise (“Standard Franchise”) (100,000 or more people).

• The Initial Franchise Fee is fully earned upon signing of the Franchise Agreement, and there are no refunds under any circumstances.

2.  Initial Training and Material Fee:  $10,000

• You must also pay an Initial Training and Materials Fee at the time you sign the Franchise Agreement. The Initial Training and Materials Fee is $10,000 and is fully earned upon payment. There are no refunds of the Initial Training and Materials Fee under any circumstances.

3.  Opening Inventory:  $2,000 to $3,000

• Depending upon the territory size of your LearningRx Center, you must pay LearningRx between $2,000 and $3,000 for opening inventory of the student kits and/or workbooks (“Products”). Each student will need one or more kits and/or workbooks depending on the program.

• You must also purchase a trainer kit for each trainer in your Center.

4.  Area Development Fee:  50% of the Development Franchise Fee multiplied by the number Centers you are authorized to open under your Development Schedule

• After you have opened your first Center, or if you possess the necessary business operational skills and financial resources, you may request one or more additional territories (“Development Territory”) in which to have the rights to develop additional Centers (“Area Development Rights”) within a prescribed schedule (“Development Schedule”).

• If you sign an area development agreement (“Area Development Agreement”), the then-current Initial Franchise Fee and Initial Training and Materials Fee you will pay for each Center you commit to open will be reduced (“Development Franchise Fee”) by 20%.

• At the time you sign the Area Development Agreement, you will pay LearningRx an area development fee (“Area Development Fee”) equal to 50% of the Development Franchise Fee multiplied by the number Centers you are authorized to open under your Development Schedule.

• Below is an example, please note the amount of the franchise fee reduced is for illustration purposes only.

Example for 1 Additional Standard Franchise:

• Initial Franchise Fee: $25,000 × .20 = $5,000 discount
• $25,000 – $5,000 = $20,000 fee

• Development Franchise Fee = $20,000 + $10,000 = $30,000

• Area Development Fee = 50% of Development Franchise Fee
• .50 × $30,000 = $15,000

• The Area Development Fee is not refundable to you under any circumstances once paid. You will pay the balance of each Development Franchise Fee at the time you sign each Franchise Agreement for each Center you actually open in your Development Territory.

• If you enter into an Area Development Agreement for 1 or more Development Territories, you must open at least 1 new Center in each Development Territory every 12 months.

5.  Initial Marketing Fee:  $17,000 to $25,000

• You must also pay LearningRx, at the same time and in the same manner as you pay your Initial Franchise Fee, depending upon the territory size of your LearningRx Center, a fee of between $17,000 and $25,000 for an initial sales and marketing campaign (“Marketing Launch Fund”).

• The Marketing Launch Fund is fully earned by LearningRx at the time you sign the Franchise Agreement and is non-refundable for any reason.

6.  Royalty Fee:  8% of Gross Revenues or the Minimum Monthly Royalty; adjusted to 7.5% for revenues above $500,000/yr and to 7% for revenues above $750,000/yr (within a calendar year)

• Due Date:  Due on the 10th day of each month for the prior month’s Gross Revenues.

• Required of all Franchisees.

7.  Marketing Development and Research Fund (MDRF):  2.5% of Gross Revenues per month, or the Minimum MDRF Payment, up to a maximum of $15,000 per calendar year per Center

• Due Date:  Due on the 10th day of each month for the prior month’s Gross Revenues.

• Required of all Franchisees.

• MDRF includes the development of: marketing materials, public relations materials, a local Center website, materials for and national outreach to professionals, digital marketing materials and systems, a national website, and other websites.

• This fund also invests in cognitive research, hosting, social media management, reputation management, and national SEO efforts for the various web properties.

8.  Boost Marketing Program:  up to $3,000 per year

• Due Date:  As incurred.

• Includes local SEO services, local call and lead tracking, local web directories, local review sites, and reputation management services.

• Required of all Franchisees after the 1st year of operation. The 1st year of this expense is included in your Marketing Launch Fund.

9.  Digital Marketing Program:  up to $2,000 per month

• Due Date:  As incurred.

• During the first 6 months of operation, the digital marketing plan will be part of the marketing launch fund.

• After the 1st year, the digital marketing plan will be required of a Center that generates less than $360,000 gross revenue for a standard franchise or $180,000 for a micro franchise for the previous 12-month period and the franchisee fails to meet its minimum marketing requirements for the past 12 months.

10.  Cooperative Advertising Requirement:  for the first 6 months of operations, the greater of 3% of Gross Revenue per month or 2/3 of the lowest amount paid by another Center, up to the Maximum Cooperative Advertising Requirement

• Beginning the 7th month of operations, the Cooperative Advertising Requirement is 3% of Gross Revenues each month, up to the Maximum Cooperative Advertising Requirement.

• The Maximum Cooperative Advertising Requirement is $3,000 per month.

• Due Date:  As determined by the cooperative.

• Advertising contributions made to the advertising cooperatives are determined by majority vote of members of the cooperative.

• The funds are used to develop and implement special advertising and promotions for the region.

• These advertising contributions made to the advertising cooperatives count toward local advertising minimums.

11.  Ongoing Purchase of Student/Trainer Kits:  LearningRx’s then-current fee. LearningRx estimates you will spend $3,000 to $5,000 per year.

• Due Date:  As incurred.

• Franchisees will purchase an initial inventory of the student kits and/or workbooks (“Products” currently offered). Each student will need 1 or more kits and/or workbooks depending on the program.

• Franchisees will also purchase a trainer kit for each trainer in their Center.

• Franchisees will be required to purchase these from LearningRx on an ongoing basis. The cost of these kits/workbooks/digital programs will vary based on the number of students, your number of trainers, and which program is being used.

12.  Initial Training for Additional Persons:  $100 per person per day

• Due Date:  As incurred.

• Training for up to 4 persons is included in the Initial Training and Materials Fee.

13.  Sales Training:  $75 per 60-minute session

• Due Date:  As incurred.

• During the 1st year after execution of the Franchise Agreement, Sales Training is provided to Directors at no cost.

• A minimum of 4 sessions of Sales Training is required if a Center is below 40% on the consultation closure rates.

14.  Additional Assistance at Your Location:  $500 per day (2-day minimum), plus the cost of LearningRx’s travel and living expenses

• Due Date:  As incurred.

• Additional charges only incurred for at-location assistance beyond the initial training.

15.  Transfer Fee:  $1,000 to $2,000

• Due Date:  Prior to acceptance of transfer.

• Payable by transferee before you sell your franchise.

• This fee does not include the then-current Initial Training and Materials Fee.

16.  Satellite Location:  $5,000 per year

• Due Date:  As incurred.

• Payable only if you request and LearningRx grants you the right to operate a Satellite Location.

17.  Audit:  cost of audit, plus 1% interest per any reported time period on understatement

• Due Date:  Immediately.

• LearningRx pays all audit costs unless the audit shows an understatement of at least 2% of Gross Revenue for any reported time period.

18.  Interest:  1% per month or the maximum interest rate allowed by applicable law, whichever is less

• Due Date:  30 days after due date.

• Franchisees must pay interest on late payments and payments returned to LearningRx due to insufficient funds.

19.  Renewal Franchise Fee:  $2,500; unless you are in the top 30% of franchisees in Gross Revenue for the prior calendar year of operations, then $1,000

• Due Date:  30 days prior to renewal.

• Initial franchise term is 5 years. The Renewal Term is 5 years.

20.  Computer and Communications Equipment Upgrades and Maintenance:  estimated at $3,400 to a maximum of $5,000

• Due Date:  As incurred or as agreed.

• You must purchase upgrades and pay for maintenance for your computer and communications equipment, including upgrades for any software, or system upgrades when LearningRx requires you to do so.

21.  Technology Fee:  $1,800 to $2,400 per year

• Due Date:  Four payments due on the 1st day of each quarter for the prior quarter.

• You must use LearningRx’s proprietary financial, accounting, and contact management software as specified by LearningRx, as well as other technology systems that may change over time.

• LearningRx reserves the right to change the amount of the Technology Fee upon prior notice to you.

22.  Fines:  $100 to $3,000

• Due Date:  As incurred.

• LearningRx may determine the exact amount of the fine at its sole discretion.

• Fines may be assessed for your violations of your obligations under the Franchise Agreement, including but not limited to, for late payments, failure to submit reports, failure to attend training, failure to attend a required conference, and use of unauthorized marketing materials.

23.  Seminars, Conventions, Conference Fees:  LearningRx’s then-current fee to attend seminars, conventions, and conferences it may hold from time to time

• Due Date:  As incurred.

• The fee will depend on LearningRx’s costs to conduct such seminars, conventions, and conferences, including speaker fees and other direct expenses. The fee will range from $250 to $600.

24.  Indemnification and Costs and Attorney’s Fees:  variable

• Due Date:  As incurred.

• You must reimburse LearningRx if it is held liable for claims resulting from your Center operations. You must also pay its attorneys’ fees if it takes legal action to enforce the Franchise Agreement due to your breach.

25.  Reimburse LearningRx for Certain Taxes:  the amount of all sales taxes, use taxes, personal property taxes, and similar taxes imposed upon, required to be collected by, or paid by LearningRx or its affiliates on account of services or goods furnished to you.

• Due Date:  As incurred.