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Earnings Claims of Top Franchises Revealed

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Considering a Pizza Hut Franchise? Don’t Overlook These 23 Important Franchise Fees

by Franchise Chatter on April 23, 2017

in Franchise Fees, Pizza Franchises

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Don't Invest in a Franchise Until You Check Out This List

If you are considering a Pizza Hut 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 Pizza Hut’s 2017 FDD).

1.  Initial Franchise Fee:  $25,000

  • You must pay Pizza Hut an initial franchise fee of $25,000 for each System Restaurant when you sign the Location Franchise Agreement. If you acquire existing System Restaurants from Pizza Hut or its subsidiaries, this initial franchise fee will be included in the purchase price.

2.  Development Fee:  $25,000 for each System Restaurant to be developed

  • If you sign one or more Development Agreements to develop new System Restaurants, not in connection with an acquisition of existing System Restaurants from Pizza Hut or its subsidiaries, you must pay Pizza Hut a development fee of $25,000 for each System Restaurant.
  • The Development Agreement will specify the date by which the System Restaurant must be open for business. If you open the System Restaurant by the scheduled time, Pizza Hut will apply the development fee to the initial franchise fee for the System Restaurant.
  • If you do not open on time, Pizza Hut will retain the development fee. The development fee is not generally refundable.

3.  Development Services:  varies

  • An affiliate of Pizza Hut, YRSG, offers various development services, including site feasibility, real estate services, A&E oversight and construction management services, to Pizza Hut franchisees under certain circumstances.

4.  Computer System:  $0 to $30,000

  • You must acquire and use the Computer System, or another computerized point-of-sale system and accounting software approved by Pizza Hut, in the operation of your System Restaurants and must pay Pizza Hut, its affiliates, or approved vendors fees associated therewith, which range from $0 to $30,000.

5.  Monthly Service Fee:  6.0% of “Gross Sales” (6.5% of Gross Sales under certain circumstances)

  • Due Date:  Payable monthly by the 20th day of the next month.
  • “Gross Sales” means all revenue received at franchised System Restaurants, excluding only sales taxes.

6.  Taxes:  as levied by tax authorities

  • Due Date:  As incurred and upon demand.
  • Includes all sales taxes, personal property taxes, excise taxes, value added taxes, and similar taxes on account of services or goods provided by Pizza Hut. Among other things, this includes taxes related to collection by Pizza Hut of Initial Franchise Fees, Monthly Service Fees, or other fees.

7.  National Advertising:  2.5% to 3% of Gross Sales

  • Due Date:  Same as monthly service fees.
  • You must contribute 2.5% to 3% of your Gross Sales for National Advertising.
  • While the Advertising Committee Agreement is in effect, Pizza Hut will credit the dues you pay to the International Pizza Hut Franchise Holders Association (“IPHFHA”) against your National Advertising obligation (if the dues IPHFHA assesses are at least 2% of Gross Sales).

8.  IPHFHA Dues:  2.5% to 3% of Gross Sales (set by franchisees); currently 2.5%

  • Due Date:  Established by franchisees.
  • You must belong to IPHFHA and pay the dues it assesses its members while the Advertising Committee Agreement is in effect. Pizza Hut will credit the dues you pay to IPHFHA toward your National Advertising obligation.

9.  Local Advertising:  the difference between 4.25% of your Monthly Gross Sales and the required National Advertising Contribution rate

  • Due Date:  Must be expended monthly, based on previous month’s sales and confined to broadcast media.
  • Can be redirected by Pizza Hut to local advertising cooperative.

10.  Cooperative Advertising:  the difference between 4.25% of your Monthly Gross Sales and the required National Advertising contribution rate

  • Due Date:  Same as monthly service fees.
  • If required, supersedes local advertising expenditures.

11.  Digital Innovation Fund:  $.27 per online order

  • Due Date:  Same as monthly service fees.
  • Funds are collected by PH Digico LLC (“Digico”) and may be increased by Digico, as it determines in its sole discretion to reflect actual costs and projected expenses and to maintain market competitiveness and functionality.

12.  Revenue Management Solutions (“RMS”) Fee:  $500 per year per unit

  • Due Date:  As obtained.
  • Fees are payable to and collected by RMS, a third party vendor. Your use of the RMS Services is currently optional; however, Pizza Hut reserves the right to require your use of such RMS Services at anytime in the future, in its discretion.

13.  Software Training Fee:  $1,500 plus travel and living expenses

  • Due Date:  As incurred.
  • Training at your location will cost $1,500 for up to 4 days.

14.  Software Maintenance/Support Fee:  currently $1,792 per year per unit for all services listed here (Pizza Hut may increase this fee as needed)

  • Due Date:  Twelve monthly bills.
  • For software support, ongoing menu maintenance, help desk, enhancements, and research and development, which Pizza Hut requires or provides.

15.  Training:  reasonable publication, preparation, and administrative fees (set by Pizza Hut)

  • Due Date:  As incurred.
  • Pizza Hut provides one set of the mandatory paper-based training materials per System Restaurant (which do not include e-learning or the blended approach); you must pay for replacement copies, all optional training materials, and other incidental costs, including hardware and licensing costs, if applicable, for on-line or computer training.

16.  Additional Materials:  reasonable publication, preparation, and administrative fees (set by Pizza Hut)

  • Due Date:  As obtained.
  • Pizza Hut provides one copy of the Manual per System Restaurant free; you must pay Pizza Hut’s uniform fee for extra copies.

17.  Inspection and Testing Costs (if paid by you):  $0 to $50,000, depending on the product (costs include salaries of Pizza Hut’s employees, travel costs, and laboratory charges)

  • Due Date:  When Pizza Hut requests.
  • Pizza Hut need not inspect or test a supplier you propose until it is satisfied that you or the supplier will pay all costs associated with the inspection and testing of the proposed supplier and of samples of their products.

18.  Audit:  costs of audit; interest on underpayment, not greater than maximum legal rate

  • Due Date:  5 business days after billing.
  • You must reimburse costs only if underpayment is 2% or more of amount due. You must pay interest on all underpayments.

19.  Employee Piracy:  double the annual compensation of employees involved, plus costs and attorneys’ fees

  • Due Date:  Upon hiring.
  • Applies to employees of Pizza Hut and other franchisees.

20.  Late Charges:  as set by Pizza Hut (currently 1.5% per month), but not greater than maximum legal rate

  • Due Date:  As incurred.
  • Due if you do not pay Pizza Hut any amount you owe within the time allowed.

21.  Unauthorized Closure:  double the past year’s average monthly service fee

  • Due Date:  At the time a franchised System Restaurant is closed without Pizza Hut’s consent.
  • Charged when the System Restaurant closes without Pizza Hut’s consent.

22.  Relocation:  maximum $25,000

  • Due Date:  At time replacement unit opens.
  • Pizza Hut may waive a portion of the initial franchise fee if replacement unit is open within 12 months after existing Restaurant closes.

23.  Transfer Fee:  $2,500, plus an additional $250 per unit transferred

  • Due Date:  At time a request for transfer is made.
  • Charged when there is a transfer of agreement or transfer of your ownership.

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