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Considering a Wendy’s Franchise? Don’t Overlook These 17 Important Franchise Fees

by Franchise Chatter on August 24, 2017

in Franchise Fees, Hamburger Franchise

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Wendy's Classic Double Hamburger Photo by _gem_

If you are considering a Wendy’s franchise, don’t get blindsided by these 17 important franchise fees (from the initial franchise fee, to the royalty fee, to 15 other fees found in Items 5 and 6 of Wendy’s 2017 FDD).

1.  Application Fee:  $5,000

  • If you are new to the Wendy’s system, you must sign the Preliminary Letter Agreement attached to the disclosure document and you must pay an Application Fee of $5,000 to help defray some of the costs of processing the application and initial orientation.
  • If you are already part of the Wendy’s system, or in other unique, limited instances, Wendy’s may waive the Application Fee.

2.  Background Check:  $325 for each background investigation

  • Wendy’s conducts a background investigation on all individuals who will become a named franchisee, guarantor, or who will own 5% or more ownership interest in a franchisee entity. Wendy’s requires reimbursement for the $325 cost of each background investigation.

3.  Technical Assistance Fee:  $40,000

  • Whether you are new to the Wendy’s system or are an existing Wendy’s franchisee, you must pay a Technical Assistance Fee of $40,000 for each Wendy’s Restaurant at the time the Franchise Agreement is executed.
  • If you are executing a Franchise Agreement in 2018, your Technical Assistance Fee will be $50,000 for each Wendy’s Restaurant.
  • This fee is applied generally to help defray some of the costs to the franchisor in providing technical assistance in the development of your Wendy’s Restaurant, initial training of you or your Operator, and in providing other assistance associated with the opening of your Wendy’s Restaurant.

4.  Franchise Development Program Fee:  $15,000 to $30,000

  • Under the Wendy’s Franchise Development Program (“FDP”), Wendy’s franchisees who build a new Wendy’s Restaurant or remodel an existing Restaurant will have the option of contracting with Wendy’s and/or one of its affiliates as an independent contractor, to perform project management services.
  • Under the FDP, you and Wendy’s and/or one of its affiliates must sign the Project Management Agreement, which is attached to the disclosure document. If you remodel your Restaurant, the fee due under the Project Management Agreement, which is known as the “FDP Fee,” will be $20,000.
  • For new restaurant construction, scrapes and rebuilds, and guts and rebuilds, the FDP Fee will be $30,000.
  • If your Restaurant is re-imaged with an approved low-cost standard refresh design (“Refresh”), the FDP Fee will be $15,000, with additional amounts for more extensive work.
  • In addition to the FDP Fee, you are responsible for all out-of-pocket expenses incurred by Wendy’s and/or its affiliates on each project, including travel expenses.

5.  Real Estate Procurement Program:  $15,000 to cover certain of Wendy’s costs, plus a Technical Assistance Fee of $40,000 for each Restaurant

  • Under Wendy’s Franchise Real Estate Procurement Program (“Franchise REPP”), you may elect to have Wendy’s select and procure for you new Restaurant sites subject to your agreement and approval.
  • If you use Franchise REPP to obtain such real estate services, which include negotiation of a purchase contract or lease for the Restaurant site, you are required to pay a fee of $15,000 to cover certain of the franchisor’s costs, as well as a Technical Assistance Fee of $40,000 for each Restaurant as required under the Franchise Agreement.
  • Your Technical Assistance Fee is due at the time you execute the Franchise REPP Letter of Agreement.

If you acquire a Wendy’s Restaurant from Another Franchisee, or from Wendy’s or One of Its Affiliates

  • If you acquire your Wendy’s Restaurant from another franchisee, no other initial franchise fee or other initial payment (other than a transfer fee) is required to be paid by you to Wendy’s.
  • If you acquire your Wendy’s Restaurant from Wendy’s or one of its affiliates, there may be leasing or financing costs as well as the reimbursement of various other costs due to Wendy’s or its affiliates before opening, as also discussed in Item 10.
  • Specifically, these other costs may include Wendy’s Technical Assistance Fee, rent, inventory, working capital, training costs, and other costs associated with opening a Wendy’s Restaurant

6.  Royalty:  greater of (a) 4% of Gross Sales or (b) $1,000 per month

  • Due Date:  On the 15th day of the month.
  • “Gross Sales” includes all revenue from the sale of all services and products and all other income of every kind and nature related to the Franchised Business or premises, including proceeds of any business interruption insurance policies, and the sale of any promotional or premium items, whether for cash or credit, and regardless of collection in the case of credit, but shall not include (i) any sales taxes or other taxes collected from customers by you for transmittal to the appropriate taxing authority, (ii) the amount of refunds made to customers, and (iii) any amounts from coupon or discount programs approved by Wendy’s for which you are not reimbursed.
  • Gross Sales also excludes revenue you derive from selling, issuing, or increasing the balance on Wendy’s gift cards; however, revenue derived from purchases paid for with gift cards must be included in Gross Sales.

7.  National Advertising:  3.50% of Gross Sales

  • Due Date:  On the 15th day of the month.

8.  Local and Regional Advertising:  0.50% of Gross Sales

  • Due Date:  On the 15th day of the month.

9.  Additional Training:  will vary under circumstances

  • Due Date:  As incurred.

10.  Transfer:  $5,000

  • Due Date:  Before consummation of transfer.

11.  Renewal:  an amount which is not greater than 25% of the then-current Technical Assistance Fee

  • Due Date:  Before expiration of initial term of Franchise Agreement.

12.  Audit:  costs and expenses of audit, including travel, lodging, wages, accounting and legal costs, and interest on any understated amount

  • Due Date:  As incurred.

13.  Late Fee/Interest:  $100, plus interest on the overdue amount from the date it was due until paid, at the (i) rate determined by Quality, or (ii) maximum legal rate, whichever is less

  • Due Date:  As incurred.

14.  Costs and Attorneys’ Fees:  will vary

  • Due Date:  As incurred.

15.  Indemnification:  will vary

  • Due Date:  As incurred.

16.  Review of Proposed Offering Materials of Franchisee:  $10,000 or a greater amount necessary to reimburse Wendy’s for its legal, accounting, and other costs

  • Due Date:  As incurred.

17.  Aloha – Software Maintenance and Hosting Services Fee:  Software Maintenance Fee of $500 per Restaurant per year; Hosting Service Fee of $25 per Restaurant per month

  • Due Date:  $200 paid quarterly, within 30 days from the end of quarter.

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