Considering a KFC Franchise? Don’t Overlook These 18 Important Franchise Fees

Updated June 7, 2021.

If you are considering a KFC franchise, don’t get blindsided by these 18 important franchise fees (from the initial franchise fee, to the royalty fee, to 16 other fees found in Items 5 and 6 of KFC’s 2021 FDD).

1.  Initial Franchise Fee:  $45,000

• KFC charges an initial franchise fee of $45,000. The initial franchise fee is in consideration of KFC providing you the right to develop an Outlet.

• You must pay the initial franchise fee in two parts: (i) the Deposit Fee and (ii) the Option Fee.

• You will pay KFC $20,000 upon signing the Deposit Agreement (the “Deposit Fee”). If KFC does not approve the proposed site and terminates the Deposit Agreement, you will be refunded the Deposit Fee less any applicable Impact Study Fees (as defined below), provided you execute a general release agreement on a form KFC approves.

• KFC’s Impact Study guidelines allow certain Existing Franchisees to request an Impact Study on Existing Franchisees’ sites. KFC charges approximately $6,000 to conduct the Impact Study (the “Impact Study Fee”), and if the proposed site is denied as a result of the Impact Study, KFC may subtract the Impact Study Fee from your $20,000 deposit.

• If you are charged the Impact Study Fee, it is not refundable under any circumstances and is payable upon signing the Deposit Agreement.

• Unless otherwise indicated above, you will not receive a refund of the Deposit Fee under any circumstance.

• You will pay KFC $25,000 upon signing the Option Agreement (the “Option Fee”) in consideration of KFC granting you the Option to build the Outlet.

• If the Option Agreement terminates as result of a bona fide zoning or building restriction beyond your control, KFC will refund $22,500 of the Option Fee upon your execution of a general release in the form required by KFC.

• Unless otherwise indicated above, you will not receive a refund of the Option Fee under any circumstance.

2.  Training Fee:  $4,000 to $5,000 per person

• In addition, you are required to pay a training fee of $4,000 to $5,000 per person. KFC will charge you this training fee if you complete the restaurant portion of your initial training in one of the Company-Owned Outlets.

• If you do not conduct any training at a Company-Owned Outlet, you will pay third parties for KFC’s training program. The fee you pay third parties varies depending on the third parties’ cost to train you.

• In either case, the training fee will be payable prior to beginning KFC’s initial training program and is not refundable under any circumstance.

3.  Development Fee:  $45,000 multiplied by the number of new Outlets you commit to develop under the Development Agreement

• If you sign a Development Agreement, you will pay KFC a development fee (“Development Fee”) in an amount equal to $45,000 multiplied by the number of new Outlets you commit to develop under the Development Agreement. The Development Fee is payable upon execution of the Development Agreement.

• For every additional Outlet that is developed in any development year beyond those you committed to open in any development year, you will pay KFC’s then-current initial franchise fee, currently $45,000.

• The Development Fee is fully earned when paid to KFC and is not refundable under any circumstances.

4.  Royalty:  4% to 5% of Gross Revenue or a minimum of $1,350, whichever is greater, per month (minimum fee subject to adjustment based upon the Consumer Price Index)

• Due Date:  Payable monthly by the 20th day of the next month.

5.  National Co-Op:  4.5% of Gross Revenue

• Due Date:  Payable monthly by the 20th day of the next month.

• The Franchise Agreement states that KFC will not require you to pay more than 5% of Gross Revenue for advertising purposes.

6.  Renewal, if applicable:  $9,000 (subject to adjustment based upon the Consumer Price Index)

• Due Date:  As incurred.

• Payment of the renewal fee is one of several requirements that you must fulfill as a condition of renewal if you sign the Franchise Agreement.

7.  Transfer to an Existing KFC Franchisee:  $4,500 for the first Outlet and $2,250 for each additional Outlet in the same transaction

• Due Date:  Upon your execution of the Transfer Agreement.

• The transfer fee is subject to adjustment based upon the Consumer Price Index.

8.  Transfer to a New KFC Franchisee:  $9,000 for the first Outlet and $4,500 for each additional Outlet in the same transaction

• Due Date:  Upon your execution of the Transfer Agreement.

• The transfer fee is subject to adjustment based upon the Consumer Price Index.

9.  Audit:  entire cost of audit, including expenses of auditing personnel

• Due Date:  Immediately upon determination of amount.

• Payable only if audit reveals a deficiency of at least 2% of the amount of royalties actually paid.

10.  Additional/Refresh Training:  $3,000

• Due Date:  As incurred.

• Payable if KFC determines that you or any of your employees need additional training, and you or they complete that training at a Company-Owned Outlet.

11.  Costs, Expenses, and Attorneys’ Fees:  will vary

• Due Date:  After judgment is entered in KFC’s favor.

• KFC is entitled to collect these costs, expenses, and fees if it wins a lawsuit it brings against you based on the Franchise Agreement (if you win the case, you are entitled to these costs, expenses, and fees).

12.  Indemnification:  will vary

• Due Date:  As incurred.

• You are responsible for all matters arising out of the operation of the Outlet, including personal injury and property damages.

• If you sign a Development Agreement, you are responsible for all matters arising out of the business you conduct under the Development Agreement.

13.  Late Royalty Payments:  1.5% per month

• Due Date:  Upon demand.

• Payment to encourage prompt payment of royalties and cover expenses involved in processing late payments.

14.  Restaurant Operations Compliance Check (“ROCC”) – comprised of two categories: (1) Food Safety Compliance Check (“FSCC”) and (2) Brand Standards Compliance Check (“BSCC”) reevaluation:  $248.75 to $310.75 per evaluation

• Due Date:  As incurred.

• KFC will pay for ROCC evaluation (which includes both FSCC and BSCC) 3 times per year.

• If a BSCC evaluation results in an underperforming (failure), then a FSCC and a BSCC re-evaluation will be required and will be at your expense.

• If a FSCC assessment results in an underperforming (failure), then only a FSCC (and not a BSCC) re-evaluation will be required and will be at your expense.

15.  Support Services and Software Maintenance for KFC’s MERIT System:  $189.43 per unit per month

• Due Date:  Payable monthly.

• Includes help desk and data management support services, account management, and software maintenance.

• If you do not sign a new MERIT Agreement, you may be subject to a higher monthly fee.

16.  One System Fund Fee:  $180 per Outlet per month (plus applicable tax and shipping) (reoccurring payments)

• Due Date:  Payable monthly.

• Includes hardware to display merchandising materials and menu panels and other point of sales advertising materials which support national promotions.

• This amount is paid to the National Co-Op.

17.  Digital Fee:  3.5% of Gross Revenue collected from all Digital Orders

• Due Date:  Payable monthly.

• “Digital Orders” means orders placed via digital ordering platforms, channels, and third-party aggregators, such as KFC.com, GrubHub, DoorDash, UberEats, PostMates, and other digital ordering services. Digital ordering service providers may be added or removed periodically.

• The use of digital ordering services is optional, but if you elect to use digital ordering services, the Digital Fee is required. Currently, approximately 90% of franchisees participate in digital ordering services.

18.  Liquidated Damages (Development Agreement):  will vary

• Due Date:  As incurred.

• If you fail to timely open the number of new Outlets and replacement Outlets you committed to open in any development year, you will pay liquidated damages in an amount equal to 5% times the average annual Gross Revenue, for the immediately preceding 24-month period, of all KFC system Outlets built in accordance with the American Showman image, multiplied by two years, and multiplied by the difference between the number of new and replacement Outlets you committed to development and the actual number of approved new and replacement Outlets you developed during the development year.