Considering a Qdoba Mexican Eats Franchise? Don’t Overlook These 25 Important Franchise Fees

Updated May 20, 2020.

If you are considering a Qdoba Mexican Eats franchise, don’t get blindsided by these 25 important franchise fees (from the initial franchise fee, to the royalty fee, to 23 other fees found in Items 5 and 6 of Qdoba Mexican Eats’ 2020 FDD).

1.  Development Fee:  $10,000 for each restaurant to be developed

• When you sign a Development Agreement, you may be required to pay a nonrefundable development fee for each site to be developed and opened under the Development Agreement (“Development Fee”). The standard per-site Development Fee is $10,000 for each restaurant to be developed by you.

• The Development Fees may be credited toward the Franchise Fee for each site developed under, and in full compliance with, a Development Agreement.

2.  Franchise Fee:  $15,000 to $30,000

• When you sign a Franchise Agreement or License Agreement, you must pay the Company a nonrefundable initial franchise fee (“Franchise Fee”). The Franchise Fee for traditional units is $30,000 and the Franchise Fee for non-traditional units is $15,000, plus any tax or other fees imposed on the Company due to the collection of the Franchise Fee.

• If your franchise term is for fewer than the standard ten years, the Franchise Fee is $3,000 for each year or partial year in excess of six months.

• If the restaurant is developed in full compliance with the terms of a Development Agreement, the Development Fee of $10,000 may be applied toward the Franchise Fee.

• The Franchise Fee is fully earned when paid. In part, the fees compensate Qdoba Mexican Eats for, and defray costs incurred in connection with, marketing sales of franchise units, screening prospective franchisees, ensuring compliance with applicable laws relating to the offer and sale of franchises, providing initial training and supervision, and related expenditures.

• During the last fiscal year, franchisees paid $15,000 to $30,000 for the Franchise Fee. Qdoba Mexican Eats reserves the right to reduce or waive the Franchise Fee or any other fees noted in Item 5 in special circumstances.

• If you provide Qdoba Mexican Eats with adequate documentation demonstrating an honorable discharge from the United States military, it will reduce your initial Franchise Fee by $10,000.

3.  Royalty:  5% of gross sales

• Due Date:  Payable weekly.

• Gross sales includes all revenue related to the franchised business, but does not include sales tax or use tax, certain discounts, or refunds.

• If alcohol is served at the Restaurant, and applicable law prohibits payment of royalties on alcohol sales, then the gross amount of the Royalty shall be increased proportionally to account for the royalty percentage on alcohol sales that otherwise would have been owed.

• Royalties at non-traditional sites are 6%; lower rates have been set in unusual situations.

4.  Marketing Fees:  up to 1.25% of gross sales

• Due Date:  Payable weekly.

• These funds pay for the preparation of marketing and promotional materials for both Qdoba Mexican Eats and its franchisees.

• Franchisees in non-traditional locations may pay a lower Marketing Fee, a flat fee, or not be required to pay any fee unless they request special marketing assistance.

• Company may increase the fee by 0.5% in any 12-month period, up to a maximum of 4%, but increases above 4% require approval by majority vote.

5.  Local Advertising:  currently, 1.75% of gross sales

• Due Date:  Negotiated with vendor.

• Typically paid by franchisees to third parties for local advertising.

• Franchisees are required to spend this amount on marketing programs in their local market.

• Qdoba Mexican Eats has not created any advertising cooperatives. If a local or regional cooperative is formed, franchisees may be required to pay some or all of that amount to their local cooperative. Company-owned sites could be members of the cooperative, and would have the same voting rights as franchised sites.

• In no event could the cooperative require payment of monthly advertising contributions or fees in excess of the amount provided for in the Franchise Agreement.

• Qdoba Mexican Eats does not require franchisees at non-traditional locations to conduct local advertising.

6.  Technology Support License and Installation:  $199

• Due Date:  One-time payment upon opening of restaurant.

• Software license for polling.

7.  Technology Support Database Configuration:  $750

• Due Date:  One-time payment upon opening of restaurant.

• Configure database for new restaurants for credit card processing and inventory management.

8.  IT Base Services:  $3,600 to $11,500 per restaurant

• Due Date:  Negotiated with vendor.

• Includes ongoing IT services required to run your restaurant, including, but not limited to, POS software subscription or maintenance, POS hardware maintenance, back office software subscription or maintenance, menu management system subscription, Hughes Network Services, online ordering subscription and fees.

9.  IT Project Services:  $300 to $500 per restaurant, plus project costs

• Due Date:  As incurred.

• Applies to projects classified as major projects by the Vice President, Information Technology.

• Amount includes, but is not limited to, project related activities such as project management, data collection, system configuration, quality assurance testing, vendor management and software deployment, plus any related project costs.

10.  IT Support Services:  varies; currently up to $4,400 per restaurant (but Qdoba Mexican Eats can modify this fee)

• Due Date:  Annually.

• Provides data hosting, data management, platform services, and helpdesk support for restaurants using Qdoba’s Technology Systems.

11.  Q-Cash Card Program Fees:  $7.75

• Due Date:  Monthly.

• Certain fees are payable to the vendor that administers the Q-Cash program.

12.  Interest on Late Payments:  18% per annum

• Due Date:  Begins to accrue 10 days after billing; due on demand.

• Interest is charged on late Royalty payments, Marketing Fees, and other fees due Qdoba Mexican Eats.

13.  Audit:  cost of audit (plus 18% or the maximum rate permitted by law, whichever is less, on unpaid amounts)

• Due Date:  30 days after billing.

• Audit cost is payable for a follow-up audit, or if audit shows an understatement or underpayment of at least 2% of gross sales for any month.

14.  Transfer:  up to $5,000

• Due Date:  Prior to consummation of transfer.

• Payable when you sell your franchise or when you obtain Qdoba Mexican Eats’ consent to a restructuring.

15.  Renewal Fee:  greater of 15% of the then-current Franchise Fee or $5,000

• Due Date:  Earlier of 30 days before expiration of the original franchise term, or at the time the new Franchise Agreement is signed.

• Renewal fee is for an additional franchise term at the same site under a new Franchise Agreement.

16.  Extension Fee:  $1,500

• Due Date:  At time extension is granted.

• Granted on a case by case basis at Qdoba Mexican Eats’ discretion. This fee is nonrefundable and is separate from the renewal fee.

17.  Standard Training Costs:  $0 (no fee)

• There is no fee for standard training content.

18.  Costs for Additional Training:  reimbursement for per diem salary of trainer and related expenses

• Due Date:  As incurred.

• Only for training more than 3 individuals or for excess training.

19.  Inspection:  cost of follow-up inspection

• Due Date:  As incurred.

• You must pay the reasonable actual expense of a follow-up inspection if your restaurant failed the prior food safety or operational inspection.

20.  Alternative Supplier Costs:  actual expenses

• Due Date:  When incurred.

• If approved suppliers are capable of producing a product, and you would like an additional supplier approved to do so, you must reimburse Qdoba Mexican Eats for the actual costs it incurs in approving and training the alternative suppliers, including the cost of travel, lodging, and meals.

21.  Corrected Deficiency Costs:  reimbursement for expenses incurred

• Due Date:  Upon correction of deficiency.

• If you fail to correct a deficiency, the Company may correct the deficiency and obtain reimbursement from you.

22.  Indemnification:  varies

• Due Date:  As incurred.

• You must reimburse Qdoba Mexican Eats for claims against it resulting from the operation of your restaurant.

23.  Legal Fees:  varies

• Due Date:  As incurred.

• You must pay attorneys’ fees Qdoba Mexican Eats incurs due to your failure to comply with the Franchise Agreement.

24.  Taxes/Freight:  varies

• Due Date:  As incurred.

• Taxes may apply on any of the above-related fees, as required by taxing authorities, and are in addition to the fees stated.

25.  Catering Rewards Program:  varies; currently a pro rata share of the overall costs for the catering rewards program is charged to each restaurant

• Due Date:  Monthly.

• You must participate in the catering program; the rewards program is part of that program.