If you are considering a Johnny Rockets franchise, don’t get blindsided by these 19 important franchise fees (from the initial franchise fee, to the royalty fee, to 17 other fees found in Items 5 and 6 of Johnny Rockets’ 2017 FDD).
1. Initial Franchise Fee (Restaurants and Mobile Kitchen): $25,000 to $49,500
- Subject to the provisions below, Johnny Rockets currently charges an Initial Franchise Fee of $49,000 for a Johnny Rockets Traditional Restaurant or Johnny Rockets Express Restaurant and an Initial Franchise Fee of $25,000 for a Johnny Rockets Drive-Thru Restaurant or Johnny Rockets Mobile Kitchen.
- Unless you have signed an Area Development Agreement, the Initial Franchise Fee is due in one lump sum when you sign the Restaurant Franchise Agreement or Mobile Kitchen Franchise Agreement. No portion of the Initial Franchise Fee is refundable.
- To provide support to the veterans of the United States military, Johnny Rockets offers qualified United States military veterans a 25% discount on the Initial Franchise Fee.
2. Area Development Fee: $20,000 multiplied by the number of Restaurants to be developed
- If you enter into an Area Development, you must pay Johnny Rockets an Area Development Fee equal to $20,000 multiplied by the number of Restaurants to be developed.
- The Area Development Fee is due in one lump sum when you sign the Area Development Agreement. For each Restaurant you develop under the Area Development Agreement, you will receive a credit of $20,000 against the Initial Franchise Fee when you sign the Franchise Agreement for the particular Restaurant.
3. Training Fee (Restaurant and Mobile Kitchen): no charge for you and up to three additional persons; $4,000 for each additional individual that attends Johnny Rockets’ entire Restaurant Management Training Program
- For your first Restaurant or Mobile Kitchen, there is no charge for you (or, in the case where you are a corporation or other legal entity, a principal or your “Control Person”) and up to three additional persons you designate as the managers or assistant managers responsible for the operation of the Restaurant or Mobile Kitchen to attend Johnny Rockets’ Management Training Program.
- You will be required to pay Johnny Rockets for any additional training it provides to you or your employees. For Restaurants, Johnny Rockets charges a Management Training Fee of $4,000 for each additional individual that attends its entire Restaurant Management Training Program.
4. Grand Opening Publicity Support Fee (Restaurant and Mobile Kitchen): $5,000 to $10,000
- Concurrent with the payment of your Initial Franchise Fee, you must pay Johnny Rockets a Grand Opening Publicity Support Fee in an amount ranging from $5,000 to $10,000, depending on the size and location of your Restaurant.
- At least 90 days prior to the scheduled opening of your Restaurant, you must submit to Johnny Rockets a Grand Opening Publicity Plan for approval. The Grand Opening Publicity Support Fee will be used to pay for the promotional and publicity events identified in your approved Grand Opening Publicity Plan.
5. Weekly Royalty Fee: 5% of Weekly Gross Sales
- Due Date: Payable weekly for the calendar week ending on Sunday at 12:00 p.m. on or before Friday of the next week.
6. Weekly Marketing Fee: up to 4% of Weekly Gross Sales. Currently, the Weekly Marketing Fee is 1.75%, but Johnny Rockets may increase the fee to an amount not to exceed 4.0%.
- Due Date: Same as Weekly Royalty Fee.
- Johnny Rockets may, on 30 days’ notice, suspend, reinstate, or vary the Weekly Marketing Fee to an amount not to exceed 4% of Weekly Gross Sales.
7. Cooperative Advertising: up to 3% of Weekly Gross Sales
- Due Date: To be established by each Co-Op Advertising Region.
- If Johnny Rockets establishes a Co-Op Advertising Region, Johnny Rockets presently anticipates that it will be governed by written articles and bylaws, which will be approved by a majority vote, based on one vote per Johnny Rockets Restaurant owned in each region.
- If Johnny Rockets forms a Co-Op Advertising Region, you must contribute to the Co-Op. Any amount you contribute to the Co-Op will be credited against your local advertising obligations.
- Any corporate-owned restaurants located in a Co-Op Advertising Region will contribute to the Co-Op.
8. Local Advertising: 2% of Weekly Gross Sales
- Due Date: Not paid to Johnny Rockets. Due each calendar quarter.
- Includes advertising published in local newspapers and promotional merchandise distributed to the local community. All local advertising must be submitted to Johnny Rockets for its prior written approval.
- You must submit, within 15 days after the end of each calendar quarter, a computation of the amount you were required to spend for local adverting in the quarter and the amount actually expended.
- The local advertising expenditure is in addition to the Weekly Marketing Fee and Cooperative Advertising requirement.
9. Renewal Fee: the lower of the (i) Initial Franchise Fee you paid when you signed your Restaurant Franchise Agreement or (ii) of the Initial Franchise Fee then being charged by Johnny Rockets to new Franchisees
- Due Date: Upon the signing of the Renewal Restaurant Franchise Agreement.
10. Reimbursement of Insurance Costs: cost of obtaining coverage
- Due Date: On demand.
- You must pay only if you fail to maintain or procure required insurance coverage and Johnny Rockets obtains coverage for you.
11. Reimbursement of Repair Costs: cost of repairs
- Due Date: On demand.
- If Johnny Rockets discovers any defects or unsatisfactory conditions at your Restaurant and you fail to correct or repair the condition, you must reimburse Johnny Rockets for its repair costs and expenses, including meals, lodging, wages, and transportation for Johnny Rockets’ personnel inspecting the Restaurant.
12. Transfer Fee: $5,000
- Due Date: Before transfer.
- There is no Transfer Fee under the Restaurant Franchise Agreement if you transfer upon your death or disability, or you transfer to a legal entity formed solely for convenience of ownership.
- Transfers are subject to Johnny Rockets’ prior written consent and its then-current franchisee approval process and standards.
13. Audit: all amounts shown to be due, plus (i) interest equal to the lower of the maximum rate permitted by law or 15% per annum of the deficient amount; (ii) a penalty in an amount equal to 10% of the deficient amount; and (iii) the cost of the audit
- If the deficient amount is not paid within five days after your receipt of Johnny Rockets’ demand, interest as described in (i) above will begin to accrue on the penalty described in (ii) above.
- Due Date: On demand
- You must pay interest, penalties, and audit costs only if audit shows an understatement of 1% or more of Weekly Gross Sales for any period.
- Interest begins to accrue from the date of the underpayment.
14. Late Charge: the greater of (i) 10% of the amount due, or (ii) $250, plus interest at the lower of the maximum rate permitted by law or 15% of the amount past due, from the date a payment was due until it is paid
- Due Date: Begins to accrue on the date the past due amount was due and continues to accrue until the past due amount is paid in full, including all Late Charges.
15. Damages for Employee Raiding: $10,000
- Due Date: On demand.
- You must pay only if you violate Section 17.E of the Restaurant Franchise Agreement relating to the employment of current or prior agents or employees of Johnny Rockets or any of its franchisees.
16. Costs and Attorneys’ Fees: Johnny Rockets’ costs and expenses
- Due Date: As incurred.
- If Johnny Rockets prevails in any legal action or arbitration arising out of your agreements with it, or a third party brings a legal action against Johnny Rockets as a result of your actions or inactions, you must pay Johnny Rockets’ attorneys’ fees and costs.
17. Indemnification: the losses and expenses incurred by Johnny Rockets
- Due Date: As incurred.
- You must indemnify and hold Johnny Rockets and its affiliates harmless in all actions arising out of or resulting from the development or operation of your Restaurant.
18. Supplier Review Fee: you must reimburse Johnny Rockets for all costs and expenses incurred by it in reviewing or approving a supplier proposed by you, including any travel and lodging expenses it incurs
- Due Date: As incurred.
- Except for those Approved Products where Johnny Rockets has a designated Single Source Approved Supplier, you may request the right to purchase a product or supply not yet approved by Johnny Rockets and/or from a supplier not yet approved in writing by Johnny Rockets, after it has an opportunity to review and approve or disapprove of the supply or supplier.
19. Taxes: you must reimburse Johnny Rockets for any state or local taxes imposed on it as a result of its receipt or accrual of the Initial Franchise Fee, Weekly Royalty Fee, Weekly Marketing Fee, or other fees it collects under the terms of the Franchise Agreement
- Due Date: On demand.
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