Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Considering a Restoration 1 Franchise? Don’t Overlook These 23 Important Franchise Fees

by Franchise Chatter on May 4, 2017

in Franchise Fees, Repair and Restoration Franchise

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

If you are considering a Restoration 1 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 Restoration 1’s 2017 FDD).

1.  Initial Franchise Fee:  $49,500 for a Territory up to 250,000 in population, and an additional $175 per 1,000 people over 250,000 in your Territory

  • You will pay Restoration 1 an initial franchise fee of $49,500 for a Territory up to 250,000 in population, and an additional $175 per 1,000 people over 250,000 in your Territory when you sign the Franchise Agreement. The franchise fee is due when you sign the Franchise Agreement.
  • The initial franchise fee generally is calculated uniformly for all franchisees, but has been negotiated for franchisees acquiring larger territories. The initial franchise fee is nonrefundable.
  • Restoration 1 currently offers a $7,000 discount if you were honorably discharged from any branch of the United States military in the 10-year period before you apply to become a franchisee.

2.  Royalty Fee:  7% of Collected Gross Revenue

  • Due Date:  Monthly.
  • You must pay your royalty fee directly to Restoration 1.
  • “Collected Gross Revenue” means all collected revenues from the Franchised Business. Collected Gross Revenue does not include sales tax or use tax.

3.  Marketing Fund Contribution:  an amount Restoration 1 determines periodically, but not to exceed 2% of Collected Gross Revenue; currently, 1% of Collected Gross Revenue

  • Due Date:  Monthly.

4.  Technology Fee:  $399/month

  • Due Date:  Monthly.

5.  Local Advertising:  2% of Collected Gross Revenue

  • Due Date:  Monthly.
  • You pay directly to local suppliers, subject to Restoration 1’s approval. Restoration 1 may require your expenditures to be used in cooperative advertising.

6.  Marketing in Another Protected Territory:  liquidated damages of up to $5,000

  • Due Date:  At the time of occurrence.

7.  Improper Solicitation of Another Franchisee’s Employees:  liquidated damages of up to $5,000

  • Due Date:  At the time of occurrence.

8.  Audit Expenses:  all costs and expenses associated with audit, approximately $1,500 to $5,000

  • Due Date:  Upon demand.
  • Audit costs payable only if the audit shows you have not spent a minimum of 2% on local advertising or if you underreported amounts you owe Restoration 1 by 3% or more.
  • Restoration 1 assumes costs vary depending on factors including prevailing auditor’s rates in your area, the business activity being audited, and how well you keep your books and records.
  • You pay Restoration 1’s actual costs only. You should be able to investigate these costs by contacting auditors in your area.

9.  Interest Charges and Late Fees:  1.5% per month or the highest rate allowed by law, if less. For royalties, there is also a late fee of an additional 1.5 percentage points of Collected Gross Revenue

  • Due Date:  Upon demand.
  • Applies to all overdue fees you owe Restoration 1. Also applies to any understatement in amounts due revealed by an audit.
  • Interest and late fees begin to accrue from the date payment was due but not received, or date of underpayment.

10.  Approval of Products or Suppliers:  all reasonable costs of evaluation, approximately $500 to $1,000

  • Due Date:  Time of evaluation.
  • You pay Restoration 1 the costs it expends in its evaluation of new suppliers you wish to purchase from, or products you wish to purchase.

11.  Insurance Policies:  amount of unpaid premiums, plus Restoration 1’s reasonable expenses in obtaining the policies

  • Due Date:  Upon demand.
  • Payable to Restoration 1 only if you fail to maintain required insurance coverage and it elects to obtain coverage for you.

12.  Transfer Fee:  $5,000

  • Due Date:  At the time of transfer.
  • Payable to Restoration 1 at time of transfer.
  • Does not apply to an assignment to a corporate entity for convenience.

13.  Refurbishment Expense:  not more than $15,000

  • Due Date:  During the fifth year of the franchise term.
  • You must update the equipment and your vehicles according to Restoration 1’s specifications.

14.  System Modifications:  not unreasonably disproportionate to your initial investment during the initial term of the franchise

  • Due Date:  As required.
  • If Restoration 1 makes changes to its System, you must adapt your business to conform to the changes. Some examples of changes include new equipment, fixtures, software, or new Marks.

15.  Additional Training Fee for a Substitute or New Manager or Principal:  $1,000 per day

  • Due Date:  Time of training.
  • Restoration 1’s initial training program is covered by your franchise fee. If you have to repeat initial training, or if you replace your Designated Manager or bring new principals into your franchise, Restoration 1 applies these additional training fees.

16.  Ongoing Training:  approximately $600 to $1,500

  • Due Date:  Time of program.
  • You must pay your expenses as well as your employees’ expenses in attending. No tuition or training fees are assessed; attendance will not be required more than one time per year and will not exceed three days in any year.

17.  Call Center Program:  reasonable set up and monthly fees imposed by the service provider; currently, $0 as the program has not yet been implemented

  • Due Date:  Monthly or at such other time(s) as Restoration 1 specifies.
  • Restoration 1 reserves the right to require you to use its preferred service provider to receive call center services.
  • Restoration 1 may pay a portion of the fees to third parties, such as the call service provider, and it may in the future have a third party collect all or a portion of the fees.

18.  Additional Operations Assistance:  currently, $600 per day, plus Restoration 1’s expenses

  • Due Date:  Time of assistance.
  • Restoration 1 provides assistance around the beginning of operations. You pay for additional assistance if you request it.

19.  Cost of Enforcement:  all costs including reasonable attorneys’ fees

  • Due Date:  Upon demand.
  • You must reimburse Restoration 1 for all costs in enforcing obligations if it prevails.

20.  Indemnification:  all costs including reasonable attorneys’ fees

  • Due Date:  Upon demand.
  • You must defend lawsuits at your cost and hold Restoration 1 harmless against lawsuits arising from your operation of the Franchised Business.
  • Restoration 1 also provides indemnification to you for any lawsuits or claims arising from your authorized use of the Marks.

21.  Final Payment:  70% of your total accounts receivable, multiplied by 9%

  • Due Date:  Payable in lieu of continuing Royalty Fee and Marketing Fund Contribution, within 30 days following expiration or termination of the Franchise Agreement.

22.  Liquidated Damages:  present value of average Royalty Fees calculated through the end of the term but not to exceed 12 months

  • Due Date:  Upon demand.
  • Payable only if you prematurely cease operations or if Restoration 1 terminates the Franchise Agreement on account of your material breach.

23.  Business Management Software:  $595/month, subject to an increase based on the third-party vendor’s pricing

  • Due Date:  Monthly.
  • Restoration 1 reserves the right to require you to use its business management software.
  • Restoration 1 may require that all fees payable to it be paid pursuant to the Electronic Funds Transfer Authorization attached as Exhibit 5 to the Franchise Agreement.

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