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Considering a Moe’s Southwest Grill Franchise? Don’t Overlook These 42 Important Franchise Fees

by Franchise Chatter on October 7, 2017

in Franchise Fees, Mexican Restaurant Franchise

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

Moe's Southwest Grill Exterior

If you are considering a Moe’s Southwest Grill franchise, don’t get blindsided by these 42 important franchise fees (from the initial franchise fee, to the royalty fee, to 40 other fees found in Items 5 and 6 of Moe’s Southwest Grill’s 2017 FDD).

1.  Initial Franchise Fee:  $30,000

  • You must pay Moe’s an initial franchise fee (the “Initial Franchise Fee”) of $30,000 when you sign your Franchise Agreement. Moe’s will not refund any part of the Initial Franchise Fee paid under the Franchise Agreement.
  • If you sign multiple Franchise Agreements at the same time with a Multi-Unit Addendum to develop a set number of Restaurants, Moe’s may, in its sole discretion, offer a reduced Initial Franchise Fee for each Restaurant that you develop. You must pay Moe’s all of the Initial Franchise Fees for all of the Restaurants that you commit to develop at the time you sign the Franchise Agreements with a Multi-Unit Addendum.
  • If you fail to develop any of the Restaurants by the deadlines set forth therein or any Franchise Agreement(s) subject to the Multi-Unit Addendum are terminated, you will not receive a refund of any Initial Franchise Fees that you have prepaid.

2.  Royalty Fee:  5% of Net Sales

  • Due Date:  Payable on or before Friday of each week on the Net Sales for the previous week (or on any other basis stated in the Manuals or in Moe’s written notice to you).

3.  Advertising Contribution:  2% of Net Sales

  • Due Date:  Same as Royalty.
  • You must make advertising contributions to the Ad Fund (the “Advertising Contribution”). Moe’s may increase the Advertising Contribution by notice to franchisees up to an additional 2% (up to a total of 4% of Net Sales) at any time.

4.  Advertising Cooperative Contribution:  an amount set by your Advertising Cooperative

  • Due Date:  Same as Royalty.
  • All members of an Advertising Cooperative, whether a franchisee-owned, company-owned, or affiliate-owned Restaurant, have voting rights on matters brought before the Advertising Cooperative for a vote, including matters relating to the amount of the required Advertising Cooperative contribution.

5.  Local Marketing Obligation:  each calendar quarter, you must spend not less than 2% of Net Sales on local market advertising

  • Due Date:  Each calendar quarter.
  • Amounts you contribute to the Advertising Cooperative for your Restaurant will be credited toward your required Local Marketing Obligation.
  • If you fail to make the minimum advertising expenditures, Moe’s may do so on your behalf and you must reimburse it for its expenses.

6.  Promotions:  costs to purchase, lease, and install all materials necessary for promotional campaigns, including counter cards, posters, banners, signs, photographs, give-away items, and gift cards. Moe’s may charge you its costs plus a reasonable administrative fee.

  • Due Date:  As incurred.
  • You will participate at your own cost in promotional programs that Moe’s establishes, and the promotional programs will be applicable to the System as a whole or to specific advertising market areas.

7.  EFT NSF FEE:  Moe’s out-of-pocket costs and an administrative fee

  • Due Date:  On invoice.
  • If Moe’s drafts money from your account under its electronic funds transfer (“EFT”) or draft system, and there are insufficient funds (“NSF”) to cover the draft, it will charge you the return costs charged by its bank and an administrative fee to cover its costs of addressing the nonpayment.
  • This fee is in addition to interest on the amount due.

8.  Interest:  1.5% per month or maximum legal interest rate

  • Due Date:  On invoice.
  • You must pay Moe’s or its affiliates interest on any amounts past due to it or its affiliates.

9.  Late Fee for Reports, Financial Statements, or Tax Returns:  $100 per day

  • Due Date:  On invoice.
  • You must pay this late fee if you fail to submit timely, complete, and accurate reports, financial statements, and tax returns when due.

10.  Taxes:  Moe’s cost

  • Due Date:  On invoice.
  • You must pay Moe’s all taxes (except its income taxes) it pays for products or services it furnishes to you, or on its collection of the Initial Franchise Fee, Royalty, and Advertising Contribution from you.

11.  Subsequent Trainee Initial Training Fee:  currently, up to $500 per trainee

  • Due Date:  Before attending training.
  • You pay this fee only if you appoint a new Primary Contact, Manager, or other employee that Moe’s designates after your Restaurant opens.

12.  On-Site Training and Assistance:  a reasonable fee; currently, $50 per hour per trainer, plus trainers’ travel and living expenses

  • Due Date:  On invoice.
  • At any time, you can request on-site training and assistance above that which Moe’s must provide. Moe’s has no obligation to provide on-site training or assistance.

13.  Additional Support/Consulting Fee:  a reasonable fee; currently, $500 per day, plus travel and living expenses

  • Due Date:  On invoice.
  • Moe’s may offer you consultation services beyond the support services under the Franchise Agreement, and if you accept them, Moe’s can charge you a consulting fee.

14.  Conference/Program Fee:  a reasonable fee, which will vary by program

  • Due Date:  As incurred.
  • Moe’s may charge you a reasonable fee for any conferences, conventions, programs, or training sessions that it conducts. Moe’s expects these fees to range from $0 to $2,500.

15.  Training Cancellation Fee:  Moe’s out-of-pocket costs

  • Due Date:  On invoice.
  • If you fail to cancel scheduled training at least 14 days prior to such training or if you are not prepared to successfully complete training, Moe’s may charge you the cost of conducting the originally scheduled training (including any travel and living expenses incurred by Moe’s representatives) and may require you to pay an additional fee for rescheduled training.

16.  Electronic Learning Management System:  amount of fees. Moe’s estimates the cost will be $500 to $750 annually.

  • Due Date:  As incurred; payable to Moe’s or third party vendor.
  • Moe’s may require you to implement an electronic learning management system for manager certification and employee training.
  • Note that an electronic learning management system is currently offered for Moe’s Management Training Program and will become mandatory if offered in the future for employee training.

17.  Supplier/Product Evaluation Fee:  the greater of $2,500 or the actual cost of the supplier/product evaluation process

  • Due Date:  On invoice.
  • Payable if you recommend new suppliers, products, and/or services to Moe’s, and it evaluates, tests, and/or inspects the suppliers, products, and/or services.

18.  Rent:  will vary based on location and other factors; Moe’s estimates rent will range from $4,500 to $20,000 per month

  • Due Date:  First day of every month; payable to Moe’s or an affiliate or third-party landlord.
  • Moe’s or an affiliate may own the premises or hold the prime lease for the premises and rent or sublease the premises of your Restaurant to you.

19.  Relocation Extension Fee:  another Initial Franchise Fee of $1,500 per year of extension on term

  • Due Date:  Before Moe’s signs relocation Franchise Agreement.
  • If you relocate to a new site and extend the term based on your new lease, you must pay to extend the term.

20.  Lease Renewal Fee:  Moe’s then-current fee. Currently, $2,000.

  • Due Date:  As incurred.
  • Moe’s reserves the right to charge you a fee if you renew your lease or if your lease is extended by a landlord for a period of 12 months.

21.  Lease Documentation Fee:  $500 for each failure

  • Due Date:  As incurred.
  • Moe’s may charge you this fee if you fail to provide it with a signed copy of any lease or a modification, amendment, or renewal of a lease.

22.  Transfer Fee:  50% of the then-current Initial Franchise Fee, if it is a Control Transfer; if it is a transfer to a related party or that is a non-Control Transfer, 10% of the then-current Initial Franchise Fee

  • Due Date:  At transfer closing.
  • Payable to Moe’s if you transfer your Franchise Agreement or Restaurant.
  • A Control Transfer occurs if an interest of more than 20% of the ownership interests in you is transferred or the transfer results in a change in control of the entity.

23.  Renewal Fee:  10% of the then-current Initial Franchise Fee

  • Due Date:  Before Moe’s signs renewal Franchise Agreement.
  • Payable to Moe’s if you enter into a renewal term.

24.  Computer Systems Fee:  a reasonable fee, which will vary based on the services provided

  • Due Date:  As needed.
  • Paid to contractors, or Moe’s or its affiliates, as applicable.
  • Moe’s may charge a reasonable systems fee for modifications and enhancements and other maintenance and support services related to the Computer System.
  • The amount for upgrades and maintenance varies based on the extent of the upgrade or services provided.

25.  POS System Support Fee:  currently estimated not to exceed $200 per month

  • Due Date:  As incurred.
  • You must remit this fee to Moe’s, its affiliate, or a third party vendor that provides the software and hardware support for your POS System.

26.  Back Office and Polling Software Fee:  approximately $126 per month

  • Due Date:  As incurred.
  • You must remit this fee to Moe’s, its affiliate, or a third party vendor that provides the back office and polling software for your Computer System.

27.  Credit Card Fees:  equipment costs and set up fees estimated to be up to $700 per terminal. Transaction fees estimated to be from 2.5% to 5.0% of the transaction amounts. Other fees may apply depending on the vendor used for credit card processing.

  • Due Date:  As incurred; payable to Moe’s or third party vendor.

28.  PCI Compliance Service Fee:  equipment cost and setup fees are estimated at $70 per month. Professional installation fees are $250.

  • Due Date:  As incurred; payable to Moe’s or third party vendor.

29.  Gift Card and Loyalty Program Fees:  amount of fees

  • Due Date:  As incurred; payable to Moe’s, its affiliate, or third party vendor.
  • You must purchase and offer gift cards and loyalty cards (and related equipment) from Moe’s designated gift card and loyalty card vendors.

30.  Purchasing Program Fee:  reasonable membership fees assessed by the Purchasing Program

  • Due Date:  As incurred.
  • If Moe’s designates or establishes any purchasing and/or distribution cooperatives/associations/programs (“Purchasing Programs”), you must become a member and pay any membership fees assessed.
  • Moe’s currently does not have any Purchasing Programs which require membership fees.

31.  Supply Chain Fee:  currently, $0.25-$0.35 per case purchased through certain Appointed Distributors

  • Due Date:  As incurred.
  • FSC collects this fee from certain Appointed Distributors from whom you may purchase products and services, to offset expenses that FSC incurs managing the supply chain.

32.  Development Deadline Extension Fee:  $2,500 per missed deadline

  • Due Date:  On invoice.
  • Payable if you fail to meet the Site Approval Deadline, Construction Start Deadline, or Opening Deadline, or Moe’s grants you an extension to any of these deadlines.
  • Moe’s may terminate the Franchise Agreement if you fail to open by the Opening Deadline or if you fail to cure a default of the Site Approval or Construction Start Deadlines.

33.  Failure to Comply with Standards or Law Fee:  up to $5,000, plus Moe’s reasonable expenses connected with any inspection, examination, or analysis of product

  • Due Date:  On invoice.
  • Payable if Moe’s inspection of products shows the products have been adulterated in any way or that your Restaurant does not comply with applicable laws.

34.  Repeated Inspection Fee:  cost of inspection

  • Due Date:  On invoice.
  • If Moe’s or its representative inspects you as a result of your repeated or continuing failure to comply with any provision of the Franchise Agreement, you must pay Moe’s the cost of the inspection, including the travel and living expenses of its representatives.

35.  Restrictive Covenant Violation Fee:  $2,500 for an hourly employee, $5,000 for an assistant manager, $7,500 for a manager or general manager, and $10,000 for a corporate employee

  • Due Date:  On invoice.
  • Payable if you hire an employee of Moe’s or its affiliates in violation of your restrictive covenants, in addition to any other remedies Moe’s may be entitled.

36.  Audit:  cost of audit

  • Due Date:  On invoice.
  • If Moe’s audits you and finds that you understated Net Sales by 2% or more, you must reimburse Moe’s all reasonable expenses connected to the audit, review, or examination (including any reasonable accounting and attorneys’ fees).
  • Moe’s estimates that the typical audit costs would be approximately $1,000 to $4,000.

37.  Liquidated Damages:  the average monthly amount of Royalty that you owed Moe’s during the past 36 months times the lesser of the remainder of the term of the Franchise Agreement or 36 months

  • Due Date:  Within 30 days of termination of your Franchise Agreement.
  • You must pay this fee only if the termination occurs after the opening date of your Restaurant and you are not insolvent at the time of termination.

38.  Appraiser’s Fee:  50% of appraiser’s fee

  • Due Date:  On invoice.
  • You must pay this fee only if Moe’s elects to purchase your assets on termination or expiration of the Franchise Agreement and Moe’s cannot agree with you on the purchase price.

39.  Indemnification of Moe’s:  Moe’s cost

  • Due Date:  On invoice.
  • You indemnify Moe’s from certain losses and expenses under the Franchise Agreement.

40.  Attorneys’ Fees:  Moe’s cost

  • Due Date:  On invoice.
  • If Moe’s becomes a party to a proceeding on an agreement between Moe’s and you, and Moe’s wins, or if Moe’s become a party to litigation or insolvency proceedings for your franchise, then you must pay Moe’s reasonable attorneys’ fees and court costs.
  • If Moe’s terminates the Franchise Agreement for your default, you must pay Moe’s all its expenses from your default or termination, including reasonable attorneys’ and experts’ fees.

41.  Reinstatement Fee:  10% of the amount of the then-current Initial Franchise Fee, plus Royalty Fees that would have been payable in period between termination and reinstatement

  • Due Date:  Before reinstated.
  • If Moe’s terminates your Franchise Agreement due to a health and safety default, you cure the default and want to be reinstated, and Moe’s agrees to reinstate your Franchise Agreement, you must pay Moe’s a reinstatement fee.

42.  De-identification Fee:  Moe’s actual costs, plus interest and an administrative fee equal to 15% of Moe’s actual costs

  • Due Date:  On invoice.
  • Payable if Moe’s terminates the Franchise Agreement, you fail to de-identify the Restaurant, and Moe’s makes the required changes on your behalf.

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