If you are considering a Qdoba Mexican Eats franchise, don’t get blindsided by these 22 important franchise fees (from the initial franchise fee, to the royalty fee, to 20 other fees found in Items 5 and 6 of Qdoba Mexican Eats’ 2017 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.
- This entire Development Fee may be credited toward the Franchise Fee for each site developed under, and in full compliance with, that Development Agreement.
2. Franchise Fee: $30,000
- When you sign a Franchise Agreement or License Agreement, you must pay the Company a nonrefundable initial franchise fee (“Franchise Fee”). The standard Franchise Fee is $30,000, 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.
- In Fiscal Year 2016, several franchisees paid reduced Franchise Fees (of $15,000) for non-traditional venues. The Franchise Fee is otherwise uniform for all traditional franchises, but Qdoba Mexican Eats reserves the right to reduce or waive the Franchise Fee or any fees noted in Item 5 in special circumstances.
3. Technology Installation Fees: $499
- Before you open your restaurant, certain technology systems must be installed by Qdoba Mexican Eats.
4. 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.
- Royalties at non-traditional sites are 6%; lower rates have been set in unusual situations.
5. 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 nontraditional locations, such as airports, 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 (although Qdoba will never have less than 30% of the vote, regardless of how many restaurants it operates).
6. Local Advertising: a minimum of 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 a minimum of 1.75% of gross sales on marketing programs in their local market.
- 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.
7. Technology Support: $3,100
- Due Date: Annually.
- Standard technology support services, POS and menu management, and Loyalty program support.
8. Q-Cash Card Program Fees: $19.50
- Due Date: Monthly.
- Certain fees are negotiated with, and payable to, the vendor that administers the Q-Cash program.
9. Service Fee for Hosted Solution Bundle: $60
- Due Date: Monthly.
- Service fee for Loyalty, Online Ordering, Mobile Pay, and Cloud Connect.
10. Next Generation Network (NGN): $161 to $230 (plus tax) per restaurant, plus universal service fees set by vendor, if applicable
- Due Date: Monthly.
- Includes broadband connection, managed firewall & network switch, security services, private Wi-Fi, and if selected, public Wi-Fi and backup network (satellite/4G) connectivity.
- A purchase option is available, which will require an initial investment of approximately $2,200 to $2,800 per restaurant.
11. 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.
12. Audit: cost of audit (plus 18% 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.
13. 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.
14. 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.
15. Training Costs: $0 (no fee)
- There is no fee for standard training content.
16. 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.
17. 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.
18. 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.
19. 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.
20. Indemnification: varies
- Due Date: As incurred.
- You must reimburse Qdoba Mexican Eats for claims against it resulting from the operation of your restaurant.
21. Attorneys’ 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.
22. 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.
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