Considering an Arby’s Franchise? Don’t Overlook These 18 Important Franchise Fees

If you are considering an Arby’s 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 Arby’s 2017 FDD).

1.  Development Fees and License Fees:  see below

• The applicable Development Agreement (“DA”) and License Agreement (“LA”) fees are listed in the chart below. You must sign a DA regardless of the number of Arby’s Restaurants you commit to develop and you must also sign a LA for each Arby’s Restaurant that you open.

• The Development and License Fees are fully earned when paid and are not refundable under any circumstances.

• Arby’s does not apply the Development Fee towards any License Fees or other fees you pay under LAs.

• You must pay the License Fee upon the earlier of either 90 calendar days before the opening, or upon the commencement of construction, of each Arby’s Restaurant in accordance with the development schedule specified under the DA.

Traditional Development

• Development Fee Per Restaurant:  $12,500
• License Fee Per Restaurant:  $37,500

Non-Traditional Development

• Development Fee Per Restaurant:  $0
• License Fee Per Restaurant:  $15,000

USA Development Incentive Program

• Development Fee Per Restaurant:  $12,500
• License Fee Per Restaurant:  $0

VetFran Program

• Development Fee Per Restaurant:  $6,250
• License Fee Per Restaurant:  $0

Proximity Incentive Program (“PIP”)

• Development Fee Per Restaurant:  $12,500
• License Fee Per Restaurant:  $37,500

2.  Royalty:  4% of total monthly Gross Sales

• Due Date:  Payable monthly on or before the 10th day of the following month.

• “Gross Sales” is the total revenue received from sale of all products and performance of all services on or from the Licensed Premises as more fully described and defined in the LA and Item 12 of the FDD (including both mandatory and optional products, programs, and services), whether cash, credit or debit card, barter exchange, trade credit, or other credit transactions, and including commissions from vending and ATM machines, but excluding coupons and discounts, and sales tax or any similar taxes.

3.  Advertising and Marketing Service Fee:  a percentage of monthly Gross Sales, with a current minimum aggregate expenditure of 4.2% of Gross Sales comprised of this fee, Local Market Advertising, and Local Cooperative Area Advertising (if applicable), as discussed below

• Due Date:  Same as Royalty Fee.

• The Advertising and Marketing Service Fee is established periodically by Arby’s or the AFA Service Corporation (“AFA”), which is the franchisee organization responsible for the performance of advertising and marketing services.

• The Advertising and Marketing Service Fee is a minimum expenditure requirement which varies when combined with your Local Market Advertising and Local Cooperative Area Advertising as discussed below.

• Arby’s forwards the payment to AFA.

4.  Local Market Advertising:  a percentage of monthly Gross Sales, with a current minimum aggregate expenditure of 4.2% of Gross Sales comprised of this fee, the Advertising and Marketing Service Fee, and Local Cooperative Area Advertising (if applicable), as discussed above and below

• Due Date:  Established by you.

• Amount is divided between your individual local market participation and the Local Cooperative Area Advertising program.

• The advertising expenditure is a minimum expenditure requirement which varies when combined with your Advertising and Marketing Service Fee as discussed above and the Local Cooperative Area Advertising program (if any) discussed below.

• Currently, your participation in the Local Cooperative Area Advertising program may exceed 3% of monthly Gross Sales and is generally between 3% and 7%.

5.  Local Cooperative Area Advertising:  a percentage of monthly Gross Sales, with a current minimum aggregate expenditure of 4.2% of Gross Sales comprised of this fee, the Advertising and Marketing Service Fee, and Local Market Advertising, as discussed above and below

• Due Date:  Determined by participants in the Co-op.

• Determined by participants in the Local Cooperative Area Advertising program and is currently in the general range of 3% to 7% of monthly Gross Sales.

• “Area” for determining participation in a Local Cooperative Area Advertising program, in most instances, is defined by the “A. C. Nielsen DMA” county coverage designation method as those terms are used in the advertising industry.

6.  Membership in ARCOP, Inc. (“ARCOP”):  upcharge on key food items (currently, cases of French fry products, roast beef, and some frozen bread)

• Due Date:  On joining ARCOP/upon purchase.

• Membership in the Arby’s Co-operative purchasing corporation, ARCOP, is voluntary. It provides volume purchasing services to franchisees and is not Arby’s affiliate.

7.  Renewal Fees:  10% of the then-applicable standard License Fee (excluding the impact of any discounts or promotions, including any development incentive programs that may be available)

• Due Date:  When you submit application for new license – must be paid at least 180 calendar days before expiration date of LA.

• Arby’s will issue you a new license if you meet all requirements in Item 17.

8.  Transfer Fee (Ownership):  $17,500 for transfer of first Arby’s Restaurant; $2,500 if you are already a party or hold a 50% interest in a party to at least one existing LA

• Due Date:  When you submit a request for approval.

• Fee is non-refundable.

• Arby’s has the right to approve transfers.

9.  Training:  $1,700 per attendee. However, there is no training fee for three managers in your first Restaurant, and for one manager in your second Restaurant. You pay the training fee for all your other attendees, and you pay your trainees’ expenses.

• Due Date:  As incurred.

• For the first and second Restaurants that you open, you are required at all times to employ three managers for each Restaurant (six total) who have completed the Management Training Program (“MTP”), or a comparable training program approved by Arby’s in its sole judgment, at a Nationally Certified Training Restaurant (“NCTR”).

• For all subsequent Restaurants, you are required at all times to employ one manager for each Restaurant who has completed MTP at an NCTR.

10.  Additional Training:  the fee ranges from $0 to $1,700. You pay for your trainees’ expenses.

• Due Date:  As incurred.

11.  Audits:  if audit shows any deficiency, you must pay interest on the deficiency. If deficiency is more than 3% of actual Gross Sales, you must pay interest plus Arby’s audit expenses.

• Due Date:  5 calendar days after demand.

• Payable if audit discloses a deficiency in reported Gross Sales.

12.  Testing of Samples for Arby’s Approval:  cost of samples

• Due Date:  As incurred.

• This covers the costs of testing new products or inspecting new products you propose.

13.  Approval of Suppliers:  costs and expenses incurred, which generally range from $2,500 to $10,000

• Due Date:  As incurred.

• Arby’s has the right to charge the proposed supplier the reasonable costs and expenses incurred in its evaluation and investigation. The supplier may pass these charges on to you.

14.  Interest:  up to the highest rate permitted by the law of the state in which the Licensed Business is located or the laws of the State of Georgia, whichever is higher, but not to exceed 18% per year

• Due Date:  Generally, 5 to 10 calendar days after demand.

• Arby’s generally will apply each overdue payment to your oldest obligation, while it reserves the right to apply payments as determined in its sole judgment, regardless of any designation by you to the contrary.

• Interest will accrue regardless of whether Arby’s exercises its right to terminate the LA due to your default in royalty, other payments, or for any reason.

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

• Due Date:  As incurred.

• Payable regarding expenses incurred to purchase and operate a franchise and upon your failure to comply with the terms of the LA.

16.  Taxes, Assessments, Penalties, Interests, and Additional Charges:  as assessed

• Due Date:  Promptly as incurred.

• You are responsible for paying and discharging all taxes, assessments, penalties, interest, and any other charges assessed against your Licensed Business.

17.  Indemnity:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Arby’s and related parties from all claims and related costs arising from the operation of the Licensed Business, construction and occupancy of the leased premises, use of any fixtures and equipment, the sale of products, or the LA.

18.  Insurance:  your insurance carrier sets the premium

• Due Date:  Before Arby’s issues an LA.

• You must name Arby’s, its corporate parent, its affiliates, and AFA (as long as membership is compulsory under the LA) as additional insureds.

• You must maintain commercial general liability insurance on an occurrence basis for personal injury, bodily injury, property damage, product and contractual liability in the minimum amount Arby’s specifies, which is at least one million dollars.

• Arby’s can change required minimums.