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Considering a Smashburger Franchise? Don’t Overlook These 34 Important Franchise Fees

by Franchise Chatter on June 19, 2017

in Franchise Fees, Hamburger Franchise



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Smashburger Photo by Average Jane

If you are considering a Smashburger franchise, don’t get blindsided by these 34 important franchise fees (from the initial franchise fee, to the royalty fee, to 32 other fees found in Items 5 and 6 of Smashburger’s 2017 FDD).

1.  Development Fee:  $20,000 multiplied by the number of Restaurants (other than the first Restaurant) you agree to develop

  • If you elect to enter into a Multi-Unit Development Agreement, you will pay Smashburger, on execution of the agreement, a development fee (“Development Fee”) at the time you execute the Multi-Unit Development Agreement.
  • The Development Fee will be an amount equal to $20,000 multiplied by the number of Restaurants (other than the first Restaurant) you agree to develop.
  • Typically, depending on the size of the agreed-upon Development Area, Smashburger’s multi-unit developers would agree to develop from 2 to 25 Restaurants over a period of 3 to 11 years. That means that the typical Development Fee would range from $20,000 to $480,000.
  • For each Franchise Agreement you must sign under the Multi-Unit Development Agreement, other than your first Franchise Agreement, Smashburger credits the balance of the Development Fee, in $20,000 increments, toward the initial franchise fee that is due as Franchise Agreements are signed.

2.  Initial Franchise Fee:  $40,000

  • You will pay Smashburger an initial franchise fee when you sign the Franchise Agreement of $40,000.
  • If you sign a Multi-Unit Development Agreement, you will sign the first Franchise Agreement and pay the $40,000 initial franchise fee for that Franchise Agreement to Smashburger at the same time you sign the Multi-Unit Development Agreement.
  • You will pay the initial franchise fee for each subsequent franchise you acquire under a Multi-Unit Development Agreement when you sign the applicable Franchise Agreement for that franchise.

3.  Lease Review Fee:  $1,500



  • Under the Franchise Agreement, you must pay Smashburger or its designated supplier (which may be an affiliate of Smashburger) a lease review fee of $1,500 for each lease agreement that you submit to Smashburger for its approval.
  • The lease review fee covers the expenses Smashburger incurs to review your lease and any applicable lease addendum. Smashburger only reviews the terms of your lease and lease addendum for its sole benefit, to determine whether they meet its then-current criteria.

4.  Grand Opening Training:  $0 to $30,000

  • For the first 2 Restaurants opened by you or your affiliates, Smashburger will send a training team to your Restaurant to assist with the grand opening at no additional cost to you.
  • For the third or subsequent Restaurants, Smashburger will send a lead trainer to assist with the grand opening of the Restaurant, although it reserves the right to send a training team to assist the lead trainer in providing grand opening support for your third or subsequent Restaurant, if it deems it necessary (and it will determine the identity and composition of that training team).
  • You will be responsible for reimbursing Smashburger the costs and expenses incurred by the lead trainer, and any other trainers or training team Smashburger sends to provide support for your third or subsequent Restaurant, including the costs of travel, lodging, meals, and a per diem to cover the trainers’ salary.
  • Currently, Smashburger estimates the cost of grand opening training to range from $0 (for your first and second Smashburger Restaurant) to $30,000 (which is the high-end of the estimate of $6,000 to $30,000 for your third or subsequent Restaurant).

5.  Royalty:  5.5% of Gross Sales

  • Due Date:  Weekly.
  • “Gross Sales” includes all revenue derived from operating the Restaurant, in whatever form (including student meal cards, meal vouchers, tokens, tickets, and comparable methods) but excludes (1) sales, use, or service taxes and (2) documented refunds, credits, and discounts to customers and employees.
  • Gift certificate, gift card, or similar program payments are included when the gift certificate, gift card, other instrument, or applicable credit is redeemed.
  • Gross Sales also include all insurance proceeds received for loss of business due to a casualty or similar event.

6.  Proprietary Software Fee:  Smashburger does not currently charge this fee. Smashburger estimates that this fee will range between $150 to $250 per month, if implemented.

  • Due Date:  Monthly.
  • For proprietary software or technology licensed to you. The amount shown is merely an estimate as Smashburger currently does not have proprietary software that it licenses to you.

7.  Marketing Fund:  currently 2.25% of Gross Sales, but up to 4% of Gross Sales

  • Due Date:  Weekly.
  • Subject to an aggregate cap on all required marketing expenditures of 5% of Gross Sales (the “Marketing Cap”).

8.  Local Advertising Cooperative: up to 3% of Gross Sales (currently this requirement is not imposed)



  • Due Date:  Weekly.
  • If established, the co-op will administer advertising programs and develop advertising, marketing, and promotional materials for an area with 2 or more Smashburger Restaurants.
  • Subject to Marketing Cap.

9.  Local Advertising:  up to 3% of Gross Sales

  • Due Date:  Monthly.
  • Smashburger may require you to spend up to 3% of your Gross Sales each calendar quarter to advertise and promote your Restaurant.
  • Smashburger may require that, instead of spending these funds yourself, you pay them to the Marketing Fund or that you pay them to Smashburger or its designee.
  • If you are required to pay the funds to Smashburger or its designee, they will spend the amounts to promote your Restaurant.
  • Subject to Marketing Cap.

10.  Website Maintenance Fee:  Smashburger does not currently charge this fee. Smashburger estimates that this fee will be $50 per month, if implemented.

  • Due Date:  Monthly.
  • You must provide required information and updates.
  • If you are in default of the Franchise Agreement, your website may be removed until defaults are cured.

11.  Interest on Late Payment:  2% per month or the maximum rate allowed by applicable state law, whichever is lower. $100 per returned check or ACH denied.

  • Due Date:  As incurred.
  • Interest owed only on past-due amounts.
  • Service fee of $100 per occurrence for checks returned or ACH requests declined due to insufficient funds.

12.  Transfer Fee – Franchise Agreement:  $15,000

  • Due Date:  As incurred.
  • Payable if Smashburger approves a transfer of your Restaurant.

13.  Transfer Fee – Multi-Unit Development Agreement:  the greater of 1% of the purchase price or $25,000, plus applicable goods and services taxes

  • Due Date:  As incurred.
  • Payable if Smashburger approves a transfer of your Multi-Unit Development Agreement.

14.  Transfer Expense – Multi-Unit Development Agreement:  up to $3,000 of Smashburger’s expenses incurred, plus disbursements and applicable taxes

  • Due Date:  As incurred.
  • Payable if Smashburger approves a transfer of your Multi-Unit Development Agreement.

15.  Renewal Fee:  50% of then-current initial franchise fee

  • Due Date:  Upon renewal.
  • Payable if Smashburger approves you to acquire a successor franchise for your Restaurant.

16.  Inspection and Audit Fee:  costs of inspection (estimated to be between $1,000 to $15,000)

  • Due Date:  Within 15 days of report receipt.
  • You reimburse Smashburger’s costs if examination was done because you failed to provide required reports or reveals a Royalty or Marketing Fund contribution understatement exceeding 2% of the amount that you actually reported.

17.  Management Fee:  10% of Gross Sales, plus costs and expenses

  • Due Date:  As incurred.
  • Only if Smashburger assumes management of your Restaurant because of your abandonment, failure to comply with the Franchise Agreement, or expiration or termination of Franchise Agreement (while Smashburger decides whether to exercise its purchase option).

18.  Product or Supplier Testing:  variable (estimated to be between $0 to $250)

  • Due Date:  As incurred.
  • If you request approval of a new product or supplier.

19.  Additional Training:  then-current per diem charge, currently $250

  • Due Date:  As incurred.
  • Initial training is provided for up to 4 people at no cost. However, if additional training is required or re-training is required, you must pay additional training fee.
  • Smashburger may charge you for training newly-hired personnel; for refresher training courses; and for additional or special assistance or training you need or request.

20.  Recruiting Fee:  200% of the annual salary of such person recruited

  • Due Date:  As incurred.
  • During the term and for 2 years after, payable only if you recruit or hire any person then-employed, or who was employed within the immediate preceding 24 months, as a general manager or assistant manager at any Smashburger Restaurant or as Smashburger’s district manager, regional manager, or corporate executive.

21.  Insurance:  variable (estimated to be between $5,000 to $15,000)

  • Due Date:  As incurred.
  • Only if you fail to obtain or maintain insurance, and Smashburger exercises its option to obtain or reinstate it for you.
  • You must reimburse Smashburger for the cost of the insurance plus a reasonable fee for its services and its out-of-pocket expenses.

22.  Indemnification:  will vary under circumstances

  • Due Date:  As incurred.
  • You must reimburse Smashburger and its affiliates if any of them is held liable for claims related to your Restaurant’s operations.

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

  • Due Date:  As incurred.
  • Payable only if you do not comply with the Franchise Agreement or Multi-Unit Development Agreement, and Smashburger is the prevailing party in any relevant litigation or arbitration.

24.  Music Fee:  currently ranges from $49.08 to $51.24 (plus applicable taxes, does not include set up fees) per month

  • Due Date:  Monthly.
  • For music services provided by the required vendor to your Restaurant.
  • Smashburger Purchasing pays the vendor directly, and initiates an ACH from your bank account for amounts you owe.

25.  Pest Control Services:  currently ranges from $46.00 to $55.00 (plus applicable taxes) per month

  • Due Date:  Monthly.
  • For pest control services provided by the required vendor to your Restaurant.
  • Smashburger Purchasing pays the vendor directly, and initiates an ACH from your bank account for amounts you owe.

26.  Customer Survey and Mystery Shop Services:  currently $115.32 per month

  • Due Date:  Monthly.
  • For customer survey and mystery shop services provided by the required vendor to your Restaurant.
  • Smashburger Purchasing pays the vendor directly, and initiates an ACH from your bank account for amounts you owe.

27.  Gift Card Service (including Aloha Command & Configuration Center):  currently $3.56 per day

  • Due Date:  Monthly.
  • The cost of managing the gift card program, replenishing your supply of gift cards, and managing the online ordering system.
  • Smashburger Purchasing pays the vendor directly, and initiates an ACH from your bank account for amounts you owe.

28.  3rd Party Gift Card Fee:  currently ranges from $0.148 to $0.304 per $1.00 of 3rd party gift cards that are redeemed at the Restaurant

  • Due Date:  Monthly.
  • The fee payable to Costco and Incomm for selling Smashburger gift cards at their locations.
  • Smashburger Purchasing pays the vendor directly, and initiates an ACH from your bank account for amounts you owe.

29.  Loyalty Program:  Smashburger does not currently charge this fee. It estimates that this fee will be $75 per month if implemented.

  • Due Date:  Monthly.
  • Currently, this cost is paid by the Marketing Fund. But Smashburger may require you to pay this charge directly in the future.
  • If Smashburger does so, Smashburger Purchasing may pay the vendor directly, and initiate an ACH from your bank account for amounts you owe.

30.  Non-Compliance Charge:  up to $100 per failure to comply with the Franchise Agreement (at Smashburger’s discretion)

  • Due Date:  On demand, the day after noncompliance occurs.
  • Only if you fail to comply with your obligations under the Franchise Agreement (for example, a failure to pay fees or submit reports when due).
  • This is in addition to any other remedies Smashburger has under the Franchise Agreement as a result of the non-compliance.

31.  Digital Menu Board Service Fee:  currently $39 per month

  • Due Date:  Monthly.
  • The cost of creating content for, and downloading it to, the Smashburger Restaurant’s digital menu board.

32.  Automated Actionable Reporting Fee – Franchise:  the initial setup fee is $150 per Restaurant. A monthly fee is charged per user, currently $20 per month per user.

  • Due Date:  Monthly.
  • The use of this service is currently optional, though Smashburger reserves the right to make it mandatory.
  • This service provides you with monthly reports about your Restaurant’s labor usage and suggestions for improvement.

33.  Automated Actionable Reporting Fee – Multi-Unit Developer:  the initial setup fee is $300. A monthly fee is charged per user, currently $40 per month per user.

  • Due Date:  Monthly.
  • The use of this service is currently optional, though Smashburger reserves the right to make it mandatory.
  • This service provides you with monthly reports about the labor usage of all Restaurants operated under Franchise Agreements signed pursuant to the Multi-Unit Development Agreement, and suggestions for improvement.

34.  Lost Revenue Damages:  will vary under circumstances

  • Due Date:  As incurred.
  • Payable if Smashburger terminates the Franchise Agreement, or you terminate it without cause.
  • An amount equal to the net present value of the Royalty fees, Marketing Fund contributions, and Local Advertising Cooperative contributions that would have become due had the Franchise Agreement not been terminated, from the date of termination to the earlier of (a) five years following termination, or (b) the scheduled expiration date of the Franchise Agreement.
  • Calculated based on Gross Sales of the Restaurant for the 12 months preceding the termination, or if the Restaurant had not been in operation for at least 12 months, then based on the average monthly Gross Sales of all Smashburger Restaurants during Smashburger’s fiscal year immediately preceding the termination.

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