If you are considering a LearningRx franchise, don’t get blindsided by these 23 important franchise fees (from the initial franchise fee, to the royalty fee, to 21 other fees found in Items 5 and 6 of LearningRx’s 2017 FDD).
1. Initial Franchise Fee: $15,000 to $35,000
- 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 $15,000 for a micro franchise (“Micro Franchise”) (up to 50,000 people), $25,000 for a rural franchise (“Rural Franchise”) (50,000 to 100,000 people), and $35,000 for a standard franchise (“Standard Franchise”) (over 100,000 people).
- The Initial Franchise Fee is due when you sign the Franchise Agreement. 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 Material Fee at the time you sign the Franchise Agreement. The Initial Training and Material Fee is $10,000 and is fully earned upon payment. There are no refunds of the Initial Training and Material Fee under any circumstances.
3. Opening Inventory: $3,000 to $5,000
- Depending upon the territory size of your LearningRx Center, you must pay LearningRx between $3,000 and $5,000 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 Material Fee you will pay for each Center you commit to open will be reduced (“Development Franchise Fee”) by twenty percent.
- 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 One Additional Standard Franchise:
- Initial Franchise Fee: $35,000 × .20 = $7,000
- $35,000 – $7,000 = $28,000
- Initial Training and Material Fee: $10,000 x .20 = $2,000
- $10,000 – $2,000 = $8,000
- Development Franchise Fee = $28,000 + $8,000 = $36,000
- Area Development Fee = 50% of Development Franchise Fee
- .50 × $36,000 = $18,000
- 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 one or more Development Territories, you must open at least one new Center in each Development Territory every 12 months.
5. Initial Marketing Fee: $12,000 to $33,000
- 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 $12,000 and $33,000 for an initial sales and marketing campaign (“Initial Marketing Fee”).
- The Initial Marketing Fee is fully earned by LearningRx at the time you sign the Franchise Agreement and is non-refundable for any reason.
6. Royalty Fee: 10% of Gross Revenues
- Due Date: Due on the 10th day of each month for the prior month’s Gross Revenues.
- Required of all Franchisees.
7. Marketing Development Fund: 2.5% of Gross Revenues per month, 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.
8. Local Internet Marketing: up to $2,000 per year
- Due Date: As incurred.
- Required of all Franchisees after the first year of operation. The first year of this expense is included in your Initial Marketing Fee.
9. Cooperative Advertising Requirement: for the first six 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 seventh 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 $1,000 for Micro Franchise, $2,000 for Rural Franchise, and $4,000 for Standard Franchise 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.
10. 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.
- You must purchase an initial inventory of the student kits and/or workbooks (“Products” currently offered). 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.
- You will be required to purchase these from LearningRx on an ongoing basis. The cost of these kits/workbooks will vary based on number of students, number of trainers, Learning Rx’s cost to produce, and territory size.
11. Initial Training for Additional Persons: $100 per person per day
- Due Date: As incurred.
- Training for up to four persons is included in the Initial Training Fee.
12. Additional Assistance at Your Location: $500 per day (two 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.
13. Transfer Fee: $7,000 to $9,000
- Due Date: Prior to acceptance of transfer.
- Payable by transferee before you sell your franchise.
- Additional on-site training may be required.
14. 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.
15. 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.
16. Renewal Franchise Fee: $5,000
- Due Date: 30 days prior to renewal.
- Initial franchise term is 10 years. The Renewal Term is 10 years.
17. 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.
18. 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.
19. 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.
20. 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.
21. Shipping Costs for Return of Materials: the shipping costs incurred to return any of LearningRx’s materials required to be returned at the expiration (unless renewed) or termination of your Franchise Agreement
- Due Date: As incurred.
- Required at the time you return materials to LearningRx upon expiration (unless renewed) or termination of your Franchise Agreement.
22. 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.
23. 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.
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