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Considering a sweetFrog Franchise? Don’t Overlook These 29 Important Franchise Fees

by Franchise Chatter on August 19, 2017

in Franchise Fees, Frozen Yogurt Franchises

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

sweetFrog Frozen Yogurt Interior Photo by Brambleton

If you are considering a sweetFrog franchise, don’t get blindsided by these 29 important franchise fees (from the initial franchise fee, to the royalty fee, to 27 other fees found in Items 5 and 6 of sweetFrog’s 2017 FDD).

1.  Initial Franchise Fee:  $30,000

  • When you sign the Franchise Agreement, you will pay sweetFrog an initial franchise fee in the amount of $30,000, which may be reduced as follows:
  • 1 Shop:  $30,000
  • 2 to 5 Shops:  $25,000
  • 6 or more Shops:  $15,000
  • If you have not signed a Development Agreement and, after you submit a reasonable site for the Shop, sweetFrog does not approve a site for your sweetFrog Shop within 6 months from the effective date of your Franchise Agreement, then you may terminate your Franchise Agreement and sweetFrog will refund the initial franchise fee, less the greater of $5,000 or the actual expenses it has incurred (including commissions).
  • During 2016, franchisees paid initial franchise fees to sweetFrog ranging from $22,500 to $30,000. Except as noted, the initial franchise fee is fully earned by sweetFrog when paid, it is uniform for all franchisees, and it is not refundable.
  • sweetFrog currently offers qualified veterans a financial incentive for newly developed franchised sweetFrog Shops. If you are a qualified veteran (as specified by sweetFrog), sweetFrog will reduce the initial franchise fee by 25%.

2.  Development Fee:  $10,000 for each Shop you will develop

  • If you sign a Development Agreement for one or more Shops, you must pay sweetFrog a development fee in the amount of $10,000 for each Shop you will develop.
  • The portion of the development fee allocable to each Shop will be credited against the initial franchise fee due for that Shop.
  • The development fee is fully earned by sweetFrog when paid, it is uniform for all franchisees, and it is not refundable.
  • If you will develop one Shop, you have not identified a location for the Shop, and you desire to obtain certain limited exclusive rights to the area where you will select your site, sweetFrog may agree to enter a Development Agreement to grant you such rights.

3.  Purchase of Merchandise, Furniture, and Promotional Items:  $16,000 to $21,000

  • Prior to opening the Shop, you must acquire from SweetFrog Enterprises, LLC a start up package (“Start Up Package”), which includes the items noted in the Manual (i.e., logoed merchandise, tables and chairs, interior signage, decor items, and costumes).
  • The estimated cost for the standard Start Up Package for Franchised Shops ranges from $16,000 to $21,000.
  • SweetFrog Enterprises, LLC may charge an average margin of up to 50% on the items in the Start Up Package to cover administrative and warehousing costs.

4.  Royalty Fee:  5% of Net Sales

  • Due Date:  On or before each Wednesday for the preceding week (Monday through Sunday).
  • You must pay the royalty fee by electronic funds transfer.
  • sweetFrog may modify the weekly period and the due date for the royalty fee and the Net Sales reports, and publish any modifications in the Manual.

5.  Marketing Assessment Systemwide:  up to 3% of Net Sales to be divided among the System Marketing Fund and Local Advertising (or a Cooperative). Currently, your total Marketing Assessment will be 2.5% of Net Sales as follows: 1.5% for System Marketing Fund and 1% for Local Advertising

  • Due Date:  System Marketing Fund – same as royalty fee; Cooperative – as required by the Cooperative; Local Store Marketing – these amounts are not paid to sweetFrog, payments for local advertising are due when billed.
  • sweetFrog will not increase the Marketing Assessment by more than 1/2% in any 12-month period. It can change the allocation of the Marketing Assessment at any time.
  • sweetFrog has the right, in its sole discretion, to establish regional Cooperatives in the geographic area that covers your Shop to which you will be required to contribute.
  • sweetFrog will have one vote for each Shop operated by it or its Affiliates in the geographic area covered by a regional Cooperative.

6.  Advertising and Promotional Material:  reasonable fee, which currently will not exceed $1,000 for each set of materials

  • Due Date:  As invoiced.
  • sweetFrog may provide you promotional and advertising materials that it develops.

7.  Website Review and Hosting Fee:  reasonable fee per Website review and per year for hosting services. Currently, no charge.

  • Due Date:  As invoiced.
  • sweetFrog may charge you a fee for developing, reviewing, and approving your Website and/or for hosting the Website.

8.  Additional Training or Training Additional, Successor, or Replacement Personnel:  reasonable fee, which is currently $1,000 per training session

  • Due Date:  Before training.
  • sweetFrog does not charge a fee for two management personnel to attend the management training program. For any additional, successor, or replacement personnel or any additional training programs, sweetFrog may charge you a reasonable fee.

9.  Alternative Product or Supplier Inspection and Testing:  cost of inspection and of the test (including sweetFrog’s administrative expenses), which currently will not exceed $2,000 for each new supplier or product

  • Due Date:  Before sweetFrog approves the supplier, as invoiced.
  • If you wish to use any item or service that sweetFrog has not yet evaluated or if you wish to purchase or lease any such item from a supplier that sweetFrog has not yet approved, you must submit a written request for approval to sweetFrog.
  • sweetFrog may require you to submit information, specifications, and samples to it to enable it to determine whether the item complies with its standards and specifications and that the supplier meets its criteria.
  • sweetFrog may send its representatives to inspect the supplier’s facilities or require you to have samples from the supplier delivered to sweetFrog or to an independent laboratory designated by sweetFrog for testing.

10.  Audit Fee:  all costs and expenses sweetFrog incurs, which currently will not exceed $5,000

  • Due Date:  As invoiced.
  • These costs and expenses include reasonable accounting and attorneys’ fees and costs.
  • Payable if an examination or audit discloses you have understated any amount owed to sweetFrog by 2% or more.

11.  Costs and Attorneys’ Fees:  sweetFrog’s costs and expenses

  • Due Date:  As incurred.
  • If sweetFrog prevails in a judicial or arbitration proceeding regarding enforcement of the terms of any agreement, you must pay sweetFrog’s attorneys’ fees and costs.

12.  Costs for Correction of Deficiencies:  reasonable fee for sweetFrog’s expenses in taking corrective action (including costs of re-inspection), which currently will not exceed $1,500 per violation

  • Due Date:  Upon demand.
  • sweetFrog may conduct inspections of the Shop and you must promptly correct any deficiencies. If you fail to correct such deficiencies, sweetFrog may correct the deficiencies and charge you a reasonable fee for its expenses.

13.  Customer Satisfaction Programs:  all costs related to the Shop for these programs, which currently include up to $100 per visit for secret shoppers

  • Due Date:  Upon demand.
  • You must participate in programs initiated to verify customer satisfaction and/or your compliance with all operational and other aspects of the System, including (but not limited to) secret shoppers.

14.  Enforcement Costs and Expenses:  any and all costs and expenses incurred by sweetFrog in enforcing the terms of the Franchise Agreement. sweetFrog can collect these costs and expenses upon your default without filing an action against you.

  • Due Date:  On demand.
  • These costs and expenses include, but are not limited to, costs and commissions due a collection agency, reasonable attorneys’ fees (including attorneys’ fees for in-house counsel employed by sweetFrog or its affiliates and any attorneys’ fees incurred by it in bankruptcy proceedings), costs incurred in creating or replicating reports demonstrating Net Sales of the Shop, court costs, expert witnesses’ fees, discovery costs, and reasonable attorneys’ fees and costs on appeal, together with interest charges.

15.  Indemnification:  varies according to loss

  • Due Date:  On demand.
  • You must indemnify sweetFrog when certain of your actions or omissions result in loss to it.

16.  Interim Management After Termination:  reasonable fee for management services, which is currently $5,000 per month

  • Due Date:  As agreed.
  • If sweetFrog gives you notice that you are in default, then it may assume management of the Shop.

17.  Interest:  lesser of 5% per year or the maximum lawful rate

  • Due Date:  On demand.
  • sweetFrog may charge interest on all overdue amounts.

18.  Intranet Fee:  a reasonable amount based on sweetFrog’s actual cost to support your usage (which will not exceed $700 annually)

  • Due Date:  As invoiced.
  • Although sweetFrog does not currently do so, it may charge you a reasonable fee per month per Shop for using its Intranet.

19.  Insurance Fee:  cost of insurance, plus sweetFrog’s reasonable expenses incurred in obtaining the insurance on your behalf

  • Due Date:  On demand.
  • If you fail to maintain the required insurance, sweetFrog may (but need not) obtain it for you.

20.  Liquidated Damages:  for early termination of Franchise Agreement, a lump sum equal to the royalty fee percentage multiplied by the weekly average of your Net Sales for the 52-week period preceding the effective date of termination multiplied by the lesser of (i) 104 weeks (2 years); or (ii) the number of weeks remaining in the term

  • Due Date:  At termination, on demand.

21.  Merchandise for Resale, Equipment, Decor Items:  reasonable cost, which currently ranges from $3,000 to $10,000

  • Due Date:  As invoiced.
  • This cost will vary significantly based upon customer demand for these items.
  • sweetFrog will develop and make available to you certain merchandise using its Marks, such as hats, t-shirts, toys, and other System memorabilia, and/or certain equipment, decor items, or other products and services.

22.  On-site Additional or Remedial Training:  then-current per diem fee, plus expenses incurred by sweetFrog’s representatives. Currently, the per diem is $250.

  • Due Date:  Before training.
  • If sweetFrog determines additional or remedial training is required at your Shop, you will pay the per diem fee plus sweetFrog’s expenses. sweetFrog’s expenses include the costs of travel, lodging, and meals.

23.  Renewal Fee:  50% of sweetFrog’s then-current initial franchise fee

  • Due Date:  Prior to sweetFrog’s execution of renewal documents.

24.  Relocation:  the greater of (i) $5,000, or (ii) your costs and expenses connected with the relocation

  • Due Date:  On demand, if required.
  • You may not relocate the Shop without sweetFrog’s express prior written consent.
  • In limited circumstances, you may request sweetFrog’s consent to relocate the Shop to another location in the Protected Area. If sweetFrog grants you the right to relocate the Shop, you must comply with such reasonable site selection and construction procedures as sweetFrog may require.
  • sweetFrog may condition its approval upon the payment of an agreed minimum royalty to it during the period in which the Shop is not in operation.

25.  Securities Offering Fee:  sweetFrog’s reasonable costs and expenses (including legal and accounting fees and costs) associated with reviewing the offering materials

  • Due Date:  Upon demand.
  • Currently, the cost for this review will not exceed $2,500.
  • sweetFrog limits its review to the manner in which the offering materials treat your and sweetFrog’s relationship and the use of sweetFrog’s Marks (if any).

26.  Software or Systems Modifications:  reasonable fee for any software or systems modifications enhancements made for sweetFrog that it or its affiliates license to you

  • Due Date:  On demand.
  • You must purchase and use certain software programs and related computer systems that sweetFrog requires.

27.  Taxes:  you must reimburse sweetFrog for any taxes imposed on it by reason of furnishing products, intangible property (including the trademarks), or services to you

  • Due Date:  Within 30 days after your receipt of an invoice from sweetFrog.

28.  Transfer Fee:  greater of:  (i) $5,000 or (ii) sweetFrog’s costs and expenses connected with transfer

  • Due Date:  On request for sweetFrog’s consent to transfer.
  • sweetFrog’s costs and expenses include legal and accounting fees and costs.
  • If transfer is to a legal entity controlled by the same interest holders for convenience of ownership, the transfer fee is limited to reimbursement of sweetFrog’s out-of-pocket costs and expenses (including legal and accounting fees and costs).

29.  Non-Cash Payment System Reimbursement:  amounts specified in sweetFrog’s gift card program

  • Due Date:  As invoiced

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