Considering a Freddy’s Frozen Custard & Steakburgers Franchise? Don’t Overlook These 21 Important Franchise Fees

Updated July 27, 2020.

If you are considering a Freddy’s Frozen Custard & Steakburgers franchise, don’t get blindsided by these 21 important franchise fees (from the initial franchise fee, to the royalty fee, to 19 other fees found in Items 5 and 6 of Freddy’s Frozen Custard & Steakburgers’ 2020 FDD).

1.  Development Fee:  $5,000 multiplied by the number of Restaurants you agree to develop in the Assigned Area

• Under the Development Agreement, you must pay Freddy’s a development fee in the amount of $5,000 multiplied by the number of Restaurants you agree to develop in the Assigned Area (“Development Fee”). You must pay the entire amount of the Development Fee in a lump sum to Freddy’s at the time the Development Agreement is signed. The Development Fee is nonrefundable.

2.  License Fee:  $25,000

• If you sign a Development Agreement to develop multiple Restaurants, you still must operate each Restaurant under a separate License Agreement. You must pay an initial license fee in the amount of $25,000 (“License Fee”) in a lump sum when you sign the License Agreement. The License Fee is nonrefundable.

• If you develop a Restaurant under the Development Agreement, Freddy’s will credit the Development Fee for each Restaurant against the License Fee for each Restaurant.

• In areas where Freddy’s offers a License Agreement to establish one Restaurant, you must sign a License Agreement and pay the License Fee before beginning development of the Restaurant site.

3.  Royalty:  4.5% of all Gross Receipts

• Due Date:  Payable the 3rd day after the end of each consecutive week during each 28-day operating period.

4.  Marketing and Advertising Fund:  0% to 3% of Gross Receipts; currently, 0.375% of Gross Receipts

• Due Date:  Payable the 3rd day after the end of each consecutive week during each 28-day operating period.

5.  Site Selection:  $0 to $2,000 per trip

• Due Date:  Upon demand.

• At present, Freddy’s does not charge for this service, but if it does charge, it will require reimbursement for travel, food, and other reasonable expenses incurred.

6.  Cooperative Advertising:  0% to 2% of Gross Receipts

• Due Date:  Payable on the 15th day after the end of each 28-day operating period.

• Your obligation to contribute to a Cooperative Advertising Program will commence 30 days after notice of implementation by Freddy’s.

7.  Additional Training:  $100 to $18,000

• Due Date:  Upon demand.

• Freddy’s will provide initial training at no cost to you, although you are responsible for your employees’ and Freddy’s employees’ travel, lodging, and food expenses.

• You must reimburse Freddy’s for training replacement personnel and other required or optional training it may provide your employees.

8.  New Product/ Service Testing:  $0 to $1,000 per product or service

• Due Date:  Upon demand.

• Freddy’s may inspect and test samples of items you desire to purchase or lease from a source not previously approved by Freddy’s in writing. You or the proposed source must pay the reasonable expenses of the testing or inspection.

9.  Audit Expenses:  $500 to $5,000 per location

• Due Date:  Upon demand.

• Payable if audit shows an understatement of reported Gross Receipts of 2% or more. Also payable if you fail to file required financial reports.

10.  Loan Approvals:  $1,000 to $5,000, not including the cost of outside services not performed by Freddy’s

• Due Date:  As incurred.

• You must pay Freddy’s an amount determined by it to fully reimburse it for its reasonable costs and expenses associated with reviewing the proposed loan arrangement, including legal and accounting fees.

11.  Transfer:  $2,500

• Due Date:  Before consummation of transfer.

• Payable when you transfer an interest in the License Agreement or the Development Agreement.

• No transfer fee is payable if you transfer the interest to Freddy’s, to an entity you form for convenience of ownership and not involving a change of beneficial ownership, or to your employees (if less than 25% of your ownership interests) and the transfer satisfies other conditions specified in the Development Agreement or the License Agreement.

12.  Private Offering Fee:  $1,000 to $5,000, not including the cost of outside services not performed by Freddy’s

• Due Date:  As incurred.

• You must pay Freddy’s an amount determined by it to fully reimburse it for its reasonable costs and expenses associated with reviewing the proposed private offering, including legal and accounting fees.

13.  Interest:  1.5% per month or as allowed by law

• Due Date:  Upon demand.

• Payable on overdue amounts owed to Freddy’s. Interest begins from the date of the underpayment.

14.  Renewal Fee:  one-third of Freddy’s then-current initial license fee

• Due Date:  Upon signing of new License Agreement before expiration of initial term of License Agreement.

15.  Costs and Attorneys’ Fees:  will vary under the circumstances

• Due Date:  As incurred.

• Payable if incurred by Freddy’s in obtaining injunctive or other relief for the enforcement of any term in the Development Agreement or License Agreement and for collecting any monies you owe to Freddy’s.

16.  Indemnification:  will vary under the circumstances

• Due Date:  As incurred.

• You must reimburse Freddy’s for claims arising from your Restaurants’ operations or any occurrence at your Restaurant.

17.  Reimbursement of Insurance Costs:  Freddy’s costs of obtaining coverage on your behalf

• Due Date:  Upon demand.

• If you fail to obtain or maintain the required minimum insurance, Freddy’s may obtain the insurance and charge its cost along with its reasonable expenses to you.

18.  Taxes:  any fees or assessments imposed on Freddy’s (other than income taxes) for acting as a franchisor or licensing the Marks

• Due Date:  Upon demand.

19.  Early Termination Fee:  will vary under the circumstances

• Due Date:  Upon demand.

• Payable if Freddy’s terminates the License Agreement after your default.

• Amount due equals the sum of all license fees, royalty fees, marketing and advertising fees, and other fees required under the License Agreement for the 18, 28-day operating periods at the Restaurant preceding your default.

20.  EcoSure/Restaurant Inspection Fees:  $206

• Due Date:  As incurred.

• Payable upon revisit following a failed inspection.

21.  OAR Restaurant Inspection Fees:  will vary under the circumstances

• Due Date:  As incurred.

• You must reimburse Freddy’s for its costs for the reinspection of your restaurant following a failed OAR inspection.