Considering a Checkers or Rally’s Franchise? Don’t Overlook These 23 Important Franchise Fees

If you are considering a Checkers or Rally’s franchise, don’t get blindsided by these 23 important franchise fees (from the initial franchise fee, to the royalty fee, to 21 other fees found in Items 5 and 6 of Checkers and Rally’s 2017 FDD).

1.  Initial Franchise Fee:  $30,000

• The standard initial franchise fee is $30,000.

• If Checkers/Rally’s has approved the location of the Franchised Restaurant prior to signing the Franchise Agreement, then you must pay the full amount of the initial franchise fee when you sign the Franchise Agreement.

• If Checkers/Rally’s and you have not agreed upon an approved location of the Franchised Restaurant before signing the Franchise Agreement, then the initial franchise fee is payable as follows: $10,000 on the date you sign the Franchise Agreement; and the remaining $20,000 within 30 days of approval of the location of the Franchised Restaurant.

2.  Asset Transfer Fee (on sale of company-owned Restaurant):  $10,000

• If your Franchise Agreement is for an existing Checkers Restaurant or Rally’s Restaurant you are buying from Checkers/Rally’s or its affiliate, then you must pay Checkers/Rally’s a $10,000 asset transfer fee in addition to the initial franchise fee, payable on or before you close on the purchase of the Franchised Restaurant’s assets.

• Checkers/Rally’s may also impose the daily incremental late charge of $500 per day if you do not pay the asset transfer fee before closing.

• This fee is fully earned by Checkers/Rally’s as of the effective date of the Franchise Agreement.

3.  Initial Advertising and Promotional Program Deposit:  $10,000

• If your Franchise Agreement is for a new Checkers Restaurant or Rally’s Restaurant, at time of signing the Franchise Agreement, you are required to make a $10,000 Initial Advertising Deposit to the National Production Fund.

• This amount is used to conduct, through the National Production Fund (and if applicable, any local advertising cooperative), an initial advertising and promotional program at the Franchised Restaurant as Checkers/Rally’s deems appropriate.

• When the initial advertising and promotional program is complete, Checkers/Rally’s will refund to you any amount of the Initial Advertising Deposit that remains unused (after deducting for incurred costs and expenses), if you and your Owners execute general releases.

• During Checkers/Rally’s 2016 fiscal year, franchisees that signed Franchise Agreements during the year paid pre-opening fees ranging from $15,000 to $40,000 (inclusive of the initial franchise fee, asset transfer fees, and the Initial Advertising Deposit).

4.  Subleases:  vary under the circumstances

• If Checkers/Rally’s agrees to sublease the Premises of your Franchised Restaurant to you, it may require you to pay it a refundable security deposit before you open or begin to operate the Franchised Restaurant.

• The amount of the security deposit, if any, will depend on the amount of the security deposit paid to the landlord of the Premises.

• During Checkers/Rally’s 2016 fiscal year, it did not receive any security deposits from franchisees.

5.  Royalty:  4% of your Net Sales

• Due Date:  Semi-monthly, on or before the 5th and 20th day of each month.

6.  National Production Fund Contributions:  you may be required to pay up to 3% of Net Sales

• Due Date:  Semi-monthly, on or before the 5th and 20th day of each month.

• Varies.

• The amount is credited toward your 4.5% advertising expenditure requirement.

• Your contribution rate is subject to change from time to time.

7.  Advertising Expenditure Requirement:  4.5% of your Net Sales

• Due Date:  Must be spent on advertising and promotion during each of your fiscal quarters.

• Includes amounts paid to NPF (other than Initial Advertising Deposit), advertising cooperatives, and amounts generally expended by you for advertising your Franchised Restaurant.

8.  Cooperative Advertising:  determined by your local or regional advertising cooperative

• Due Date:  Monthly, on the 5th day of each month.

• Payments to local or regional advertising cooperatives are credited toward your 4.5% advertising expenditure requirement.

9.  Marketing, Advertising, Promotional, and Point-of-Purchase (“POP”) Materials:  at cost, plus any related administrative, shipping, handling, and storage charges. Costs may vary per Restaurant based on merchandising capacity.

• Due Date:  Payment due upon order.

• Advertising materials not prepared by Checkers/Rally’s must be submitted for approval prior to distribution.

10.  Transfer Fee – Transfer of a Single Restaurant: $15,000 (or $10,000, if the transferee is an existing franchisee); Transfer of Multiple Restaurants: $15,000 (or 10,000, if the transferee is an existing franchisee) for the first Restaurant, plus $1,000 for each additional Restaurant to be transferred as part of a single transaction

• Due Date:  Upon transferring the franchise.

11.  Renewal Fee:  up to 50% of then-current initial franchise fee

• Due Date:  Upon signing the new Franchise Agreement.

• If your successor franchise term is 10 years, the renewal fee is 50% of the then-current initial franchise fee for a new Restaurant; if your successor franchise term is 20 years, the renewal fee is 33.33% of the then-current initial franchise fee.

12.  Training Fee:  varies

• Due Date:  Upon receipt of Checkers/Rally’s bill.

• Checkers/Rally’s does not charge training fees for 2 attendees at initial training, but may charge fees for additional attendees and for additional training.

13.  Computer System Support Fees:  $180

• Due Date:  Quarterly.

• In connection with the required Aloha POS system, you must pay Checkers/Rally’s ongoing costs for Aloha Command and Configuration Center ($90 per quarter) and Menu Management services ($90 per quarter).

14.  Interest on Late Payments:  highest contract rate of interest permitted by law, not to exceed 1.5% per month

• Due Date:  Immediately.

• This interest rate applies to any money you owe Checkers/Rally’s or any of its affiliates after the due date.

15.  Special Assistance:  currently, only out-of-pocket expenses

• Due Date:  Upon receipt of Checkers/Rally’s bill.

• Checkers/Rally’s may impose per diem fees and charges for any special assistance you request.

16.  Fees to Evaluate and Approve Alternative Suppliers:  currently, only out-of-pocket expenses

• Due Date:  Upon receipt of Checkers/Rally’s bill.

• Checkers/Rally’s may impose reasonable inspections and supervision fees to cover its costs in
  evaluating alternative approved brands or suppliers you suggest.

17.  Extension Fee:  $5,000

• Due Date:  As incurred.

• You will pay this amount if Checkers/Rally’s grants you a one-time extension to either locate, secure, or develop a site acceptable to Checkers/Rally’s for the Franchised Restaurant.

18.  Rent:  varies

• Due Date:  Monthly.

• You will only pay this amount if Checkers/Rally’s subleases the Premises of your Franchised Restaurant to you.

• If Checkers/Rally’s subleases the Premises, you may pay rent directly to the landlord or to Checkers/Rally’s. If you pay rent to Checkers/Rally’s, it may charge an amount that is higher than the rent due under the underlying lease.

19.  Audit:  cost of audit

• Due Date:  Upon receipt of Checkers/Rally’s bill.

• Payable only if you fail to furnish required information or if Checkers/Rally’s finds an understatement of Net Sales greater than 2%.

20.  Insurance:  will vary under circumstances

• Due Date:  As incurred.

• If you fail to obtain the required insurance coverage for the Franchised Restaurant, Checkers/Rally’s may obtain such coverage at your expense.

21.  Maintenance Costs:  will vary under circumstances

• Due Date:  As incurred.

• If you fail or refuse to maintain the Franchised Restaurant as required, Checkers/Rally’s has the right to do so on your behalf and at your expense.

22.  Attorneys’ Fees and Other Costs:  will vary under circumstances

• Due Date:  As incurred.

• Payable if you fail to comply with the Franchise Agreement or if Checkers/Rally’s is joined in a lawsuit that is based on your operation of a Restaurant.

23.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Checkers/Rally’s for its losses and expenses as a result of third party claims arising from your failures or breaches under the Franchise Agreement, your operation of the Franchised Restaurant, and any unauthorized acts.

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