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Considering a Tim Hortons Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on July 18, 2017

in Coffee Franchise, Donuts Franchise, Franchise Fees

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Don't Invest in a Franchise Until You Check Out This List

Tim Hortons Photo by Mark 2400

If you are considering a Tim Hortons franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of Tim Hortons’ 2017 FDD).

1.  Initial Franchise Fee:  $50,000 for a Standard Shop, $25,000 for a Non-Standard Shop, $15,000 for a Kiosk

  • The initial franchise fee for each type of Shop is as follows:
  • Standard Shop:  $50,000
  • Non-Standard Shop:  $25,000
  • Kiosk:  $15,000

2.  Training Fee:  varies

  • You must attend and satisfactorily complete Tim Hortons’ initial training program before you may open your Shop. Tim Hortons may waive this training for certain franchisees based upon their individual circumstances and experience level.
  • The cost for this training varies based upon whether you are a new or existing franchisee or a branded partner. If you are a new franchisee, the cost is CAD $2,000 (USD $1,500 to $2,000 depending upon the conversion rate); an existing franchisee CAD $780 (USD $600 to $800 depending upon the conversion rate); a Branded Partner CAD $1,450 (USD $1,000 to $1,500 depending upon the conversion rate).

3.  Development Assistance Fee:  $5,000 to $25,000

  • If you construct a Shop on real estate that you own or lease, you must pay Tim Hortons or its affiliates for any building components or fixtures that you order through Tim Hortons and you must use a third party design architect Tim Hortons has approved to prepare the initial design drawings for your Shop.
  • If you elect not to retain a project manager Tim Hortons has approved to assist you in the development process, Tim Hortons or its affiliate agrees to provide you with management and assistance through the site development process. In this situation, you must pay Tim Hortons a Development Assistance Fee.
  • The Development Assistance Fee will range from $5,000 to $25,000 depending upon the services Tim Hortons or its affiliate provides to you.

4.  Additional Payments:  $200,000 to $400,000 for a Standard Shop, and $100,000 to $350,000 for a Non-Standard Shop/Kiosk

  • In addition to the initial franchise fee, it is likely that you will make additional payments to Tim Hortons or its affiliates before opening a Shop for various equipment, fixtures, and signage that must be acquired by a Shop before its opening.
  • For a Standard Shop, these items will range in total cost from $200,000 to $400,000, and for a Non-Standard Shop/Kiosk from $100,000 to $350,000.
  • Unless the equipment delivered to you is defective or determined by Tim Hortons to be unnecessary, these amounts are non-refundable and must be paid upon receipt of an invoice for the items.

5.  Grand Opening or Re-Opening Fee:  $3,000 for a Standard Shop and certain Non-Standard Shops, $1,500 for a Kiosk

  • In addition, when you sign your Franchise Agreement, you must pay Tim Hortons a grand opening or re-opening fee of (i) $3,000 for a Standard Shop and certain Non-Standard Shops as determined by Tim Hortons; and (ii) $1,500 for a Kiosk.
  • Tim Hortons will use the grand opening or re-opening fee to pay your vendors (or reimburse you for payments you make directly to the vendors) for expenses (up to the amount of the deposit) related to your Shop’s required opening or re-opening promotional activities.

6.   Development Fee:  generally at least $300,000, plus Tim Hortons’ costs (estimated to be from $10,000 to $100,000)

  • If you enter into a Development Agreement with Tim Hortons, you must pay Tim Hortons a non-refundable development fee that it will negotiate with you (the “Development Fee”).
  • The Development Fee will depend upon how many Shops Tim Hortons thinks can be developed in your Territory. However, Tim Hortons estimates that the Development Fee will generally be at least $300,000.
  • You must pay this Development Fee in full when you sign the Development Agreement, and it is deemed fully earned when paid.
  • The Development Fee, less the current initial franchise fees already charged by Tim Hortons during the term of the Development Agreement, will be applied as a credit (the “Franchise Fee Credit”) against the current initial franchise fees for the Shops to be opened by you (or your subsidiary or affiliate) under the Development Agreement.
  • You must replenish the Franchise Fee Credit when it is exhausted in an amount Tim Hortons specifies, which may be in full (the “Replenished Franchise Fee Credit”).
  • If you default under the Development Agreement and do not cure this default within the applicable cure period, then any remaining Franchise Fee Credit balance or Replenished Franchise Fee Credit balance, as applicable, will be forfeited by you to Tim Hortons.
  • You must also reimburse Tim Hortons’ costs for preparing and negotiating the Development Agreement, including travel costs; background check costs; legal, accounting, and tax fees; and training costs. Tim Hortons has estimated that these costs will be between $10,000 and $100,000.
  • You must pay this amount in full when you sign the Development Agreement. It is nonrefundable.

7.  Royalty:  4.5% to 6% of Gross Sales

  • Due Date:  Thursday of each week on the prior week’s Gross Sales, but Tim Hortons can change the day the royalty payment is due.

8.  Advertising Contributions:  4% of Gross Sales

  • Due Date:  Within 10 days of the end of each month on the prior month’s Gross Sales.

9.  Interest and Audit Costs:  costs of audit plus interest

  • Due Date:  As incurred.

10.  Additional Training:  cost to attend additional training such as transportation, food, and lodging, and a materials fee. The materials fee will not exceed $1,000.

  • Due Date:  As incurred.

11.  Transfer Fee:  5% of the full purchase price

  • Due Date:  Before transfer.

12.  Indemnification:  will vary with circumstances

  • Due Date:  As incurred.

13.  Taxes:  amount imposed on Tim Hortons by federal, state, and local tax authorities on any fees or other amounts payable by you to Tim Hortons

  • Due Date:  Payable upon receipt of invoice.

14.  Maintaining Shop Premises in Good Repair:  varies

  • Due Date:  Reimburse Tim Hortons or pay directly to suppliers.

15.  Refurbishing Shop:  varies

  • Due Date:  As incurred.

16.  Lease for Shop Premises:  varies, but between 7% to 8.5% of Gross Sales for a Standard Shop and up to 13% of Gross Sales for Non-Standard Shops/Kiosks. Must also pay flow through charges such as CAM and Tim Hortons’ administrative expenses of billing.

  • Due Date:  Within 10 days of the end of each month on the prior month’s Gross Sales.

17.  Reorganization of Your Business:  Tim Hortons’ legal and administrative expenses incurred in processing changes resulting from the reorganization of your business structure

  • Due Date:  When invoiced by Tim Hortons.

18.  Espresso Machine and Equipment:  $165 (rental), $16,250 to $38,750 (purchase)

  • Due Date:  10th day of each month (rental), within 60 days of invoice date (purchase).

19.  Smart Store Charges:  $200 to $550

  • Due Date:  As incurred.

20.  Approving Suppliers Requested by You:  varies

  • Due Date:  On demand.

21.  Inspection Costs and Expenses:  varies

  • Due Date:  As incurred.

22.  Replenished Franchise Fee Credit:  same amount as Franchise Fee Credit

  • Due Date:  Within 30 days after the Franchise Fee Credit is exhausted.

23.  Development Default Payment:  $4,000 multiplied by the number of Shops you fail to open under your development schedule

  • Due Date:  First business day of each month.

24.  Renovation Default Payment:  $4,000 per month per Shop acquired by you that is not timely renovated

  • Due Date:  First business day of each month.

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