Considering a TGI Fridays Franchise? Don’t Overlook These 37 Important Franchise Fees

If you are considering a TGI Fridays franchise, don’t get blindsided by these 37 important franchise fees (from the initial franchise fee, to the royalty fee, to 35 other fees found in Items 5 and 6 of TGI Fridays’ 2017 FDD).

1.  Letter of Understanding/Earnest Money Deposit:  $10,000

• If you and TGI Fridays are considering entering into a Development Agreement, you and TGI Fridays will sign a Letter of Understanding outlining certain terms of the proposed Development Agreement and you must pay TGI Fridays a $10,000 earnest money deposit (“Deposit”).

• If you sign a Development Agreement, TGI Fridays credits the Deposit against the Development Fee. The Deposit is fully earned when paid and is non-refundable; provided that, if TGI Fridays unilaterally elects not to franchise the proposed territory identified in the Letter of Understanding prior to your execution of a Development Agreement, it will refund to you the Deposit.

2.  Development Fee:  $50,000 multiplied by the number of Restaurants you commit to develop under the Development Schedule

• When you sign a Development Agreement, you must pay TGI Fridays a Development Fee, which is $50,000 multiplied by the number of Restaurants you commit to develop under the Development Schedule. The Development Fee is fully earned when paid and is non-refundable.

3.  Franchise Fee:  $50,000

• When you sign a Franchise Agreement, you must pay TGI Fridays the Initial Franchise Fee in the amount of $50,000. The Initial Franchise Fee is fully earned when paid and is not refundable.

• TGI Fridays reserves the right, in its discretion, to reduce the Initial Franchise Fee as a development incentive for selected developers to accelerate development, to compensate for unfavorable economic conditions, or for any other business purpose.

4.  Background Checks:  up to $10,000 per investigation

• TGI Fridays will perform background investigations on you or one or more of your owners, which may be at your expense. The cost can be up to $10,000 per investigation.

5.  Computer Systems:  approximately $49,000 to $51,000 per system

• Before beginning operations, you must purchase the required computer systems to be used in the Restaurant. TGI Fridays or its designee acts as your agent for purchasing computer systems.

• Requirements for computer hardware and software for each Restaurant are substantially the same, although there may be differences based on the size of the Restaurant, the configuration of the Restaurant, the prototype, or other factors.

• The estimated amount for each system that you will pay to TGI Fridays ranges from $49,000 to $51,000.

• All of the computer hardware, software, and services purchased through TGI Fridays or its designee do not contain any markups or processing fees, however, TGI Fridays and its designees reserve the right to charge a markup in the future.

6.  Royalty Fee:  4% of Gross Sales

• Due Date:  7 days after the end of each fiscal period (which currently is a calendar month).

• Your Royalty Fee will increase to 4.5% of Gross Sales during your first successor term and 4.75% of Gross Sales during your second successor term.

7.  Advertising and Promotion Obligation (“APO”):  your APO will not exceed 5% of Gross Sales

a.  National Advertising Fund:  currently 4.75% of Gross Sales

• Due Date:  Same as Royalty Fees.

b.  Regional Advertising Fund or Regional Co-op Fund:  amount determined by TGI Fridays when Fund or Co-op is established

• Due Date:  Same as Royalty Fees.

c.  Local Store Marketing:  currently 0% of Gross Sales

• Due Date:  Not paid to TGI Fridays.

• Your Local Store Marketing expenditures are not paid to TGI Fridays, however, it may require that you participate in certain marketing and advertising programs, the costs of which are not included in your APO.

• Local Store Marketing monies may be spent only for advertising approved by TGI Fridays.

8.  Digital Marketing Fee:  amount determined by TGI Fridays annually (currently 0% of Gross Sales)

• Due Date:  Same as Royalty Fees.

• TGI Fridays may require you to contribute an amount determined by it (the “Digital Marketing Fee”) toward the cost of the development and maintenance of Digital Media.

9.  Audit Fees:  deficiency in Royalty Fees, advertising contributions, and other amounts owed, plus interest

• Due Date:  Within 10 days after receipt of the audit report.

• Audits are at TGI Fridays’ expense, unless the TGI Fridays audit reveals an understatement of Gross Sales of 1% or more, or underpayment of the Royalty Fee of 5% or more, or the audit is necessary because you failed to submit reports or records.

10.  Collection Costs and Expenses:  TGI Fridays’ costs and expenses

• Due Date:  On demand, if required.

• These costs and expenses include, but are not limited to, costs and commissions due a collection agency, reasonable attorneys’ fees, costs incurred in creating or replicating reports demonstrating Gross Sales of the Restaurant, court costs, expert witness fees, discovery costs, and reasonable attorneys’ fees and costs on appeal, together with interest charges on all of the foregoing.

11.  Costs and Attorneys’ Fees:  TGI Fridays’ costs and expenses

• Due Date:  On demand, if required.

• If TGI Fridays prevails in litigation regarding enforcement of the terms of any agreement, you must pay its costs and expenses, including reasonable accountants’, attorneys’, attorneys’ assistants’ and expert witness fees, the cost of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses.

12.  Indemnification:  the losses and expenses incurred by TGI Fridays and its affiliates

• Due Date:  As incurred.

• You must indemnify and hold TGI Fridays and its affiliates harmless in all actions arising out of or resulting from the development or operation of your Restaurant, excluding the gross negligence or willful misconduct of TGI Fridays.

13.  Interest:  the interest rate is the maximum rate permitted for indebtedness of this nature in the state in which the Restaurant is located, not to exceed 1.5% per month (or a portion of a month)

• Due Date:  Within 30 days from the date of invoice.

• Delinquent payments shall bear interest from the due date until received by TGI Fridays.

14.  Late Fees:  $500

• Due Date:  Due with payment of the delinquent payment.

15.  Liquidated Damages – Breach of Covenants Against Competition:  TGI Fridays’ then-current Initial Franchise Fee, plus 8% of the Gross Sales of the competing restaurant business for two years

• Due Date:  Upon demand, if required.

16.  Early Termination Damages – Franchise Agreement:  amount equal to the average monthly Royalty Fees and advertising fund contributions that you owed for the 36 months prior to the termination, multiplied by the lesser of 36 months or the number of months remaining in the term of the Franchise Agreement

• Due Date:  Within 30 days following termination.

• Payable if you default on your obligations and TGI Fridays terminates the Franchise Agreement.

17.  Early Termination Damages – Development Agreement:  amount equal to two times the average of the total annual Royalty Fees and advertising contributions owed under Franchise Agreements over the prior three-year period multiplied by the number of restaurants that remain to be developed pursuant to the Development Schedule

• Due Date:  Within 30 days following termination.

• Payable if you default on your obligations and TGI Fridays terminates the Development Agreement.

18.  Manager Training – Management Skills Training (Leadership That Rocks):  $655, plus airfare and incidentals per management trainee

• Due Date:  Upon management trainee’s registration for the course.

• Each new hire manager is required to attend this training at TGI Fridays’ Support Center.

• The cost includes course materials, facilitator costs and salaries, hotel expenses, and airport transfers. The fee does not include transportation or out-of-pocket expenses.

19.  Manager Training – Restaurant Management Essentials:  $1,000 per management trainee

• Due Date:  Upon management trainee’s registration for program.

• Each new hire manager is required to participate in the training, which must be completed in a Center of Excellence training restaurant and includes both online and hands-on training.

• The cost includes all materials for the course, the food safety exam, and a chef coat, as well as a $500 training bonus to the training GM.

20.  Manager Transfer Fee:  $25,000

• Due Date:  Upon transfer of trained manager.

21.  Post-Termination or Post-Expiration Expense:  all amounts TGI Fridays may incur, currently estimated to be $1,000 to $25,000

• Due Date:  Within 30 days from date of invoice.

• Among other things, if TGI Fridays does not acquire the Restaurant site after your Franchise Agreement terminates or expires, you must de-identify the premises. If you do not de-identify the premises, TGI Fridays may do so at your expense.

22.  Reimbursement of Insurance Costs:  TGI Fridays’ out-of-pocket costs of obtaining coverage

• Due Date:  Immediately upon receipt of invoice.

• If you fail to procure or maintain the required insurance, TGI Fridays may procure the insurance and charge its cost along with its out-of-pocket expenses to you.

23.  Relocation:  $5,000

• Due Date:  Payable when you submit relocation request.

• You may not relocate the Franchised Restaurant without TGI Fridays’ prior written consent. If it approves your request, it also has the right to charge you a Royalty Fee during the period when the Restaurant is closed equal to the average monthly Royalty Fee owed during the 12 months preceding the closure.

24.  Securities Offerings:  $15,000

• Due Date:  Payable when you submit offering documents.

• At least 30 days before any public offering or private placement of securities or partnership interests in you are made available to potential investors, you must deliver a copy of the offering documents to TGI Fridays for its review along with opinions of counsel selected by you and counsel selected by TGI Fridays to ensure that the offering documents properly use the Proprietary Marks and accurately describe your relationship with TGI Fridays and/or its affiliates.

25.  I.T. Service and Support Fee:  $1,260, billed quarterly

• Due Date:  To be invoiced and paid quarterly (in advance) in January, April, July, and October.

• This covers:  Help Desk Services (24x7x365); Point-of-Sale Services; Communications/Reporting; Security and Compliance; Purchasing, Invoicing, Research, Disputes.

• TGI Fridays reserves the right to change the fee structure as new services/platforms and technologies are added.

26.  Kitchen Management:  $60 per quarter (plus tax)

• Due Date:  To be invoiced and paid quarterly (in arrears) in January, April, July, and October.

• Software Maintenance Fee. The entire amount collected by TGI Fridays is passed through to the vendor.

27.  AirWatch:  $65 per mobile device

• Due Date:  Invoiced annually in advance.

• Mobile Device Management. The entire amount collected by TGI Fridays is passed through to the vendor.

28.  Learning Management:  $165 annually

• Due Date:  Invoiced annually in advance.

• Device Hardware Maintenance. The entire amount collected by TGI Fridays is passed through to the vendor.

29.  Successor Fee:  50% of TGI Fridays’ then-current Initial Franchise Fee for the first successor term and 30% of its then-current Initial Franchise Fee for the second successor term

• Due Date:  When you sign a Franchise Agreement for the successor term.

• TGI Fridays may offer to you a successor term if you satisfy certain conditions and meet its qualifications to remain a franchisee at the beginning of each successor term.

• The Successor Fee is in addition to, among others, any costs you incur for required remodeling.

30.  Supplier Inspection and Testing:  reasonable fee for inspection, including the actual cost of testing

• Due Date:  As incurred.

• You may submit to TGI Fridays a written request for consent to use other suppliers. As a condition of its consent, TGI Fridays is permitted to inspect the supplier’s facilities and take samples of the items proposed for testing at your expense.

31.  Supplier Payments:  TGI Fridays’ costs in paying any supplier that you fail to pay

• Due Date:  Upon receipt of invoice.

• If you fail to promptly pay one or more suppliers as required, TGI Fridays may, but is not required to, pay such supplier(s) on your behalf, and you must reimburse TGI Fridays for such payment.

32.  Taxes:  assessed amount

• Due Date:  Within 30 days from date of invoice.

• You must pay TGI Fridays the amount of any sales, gross receipts, excise, license, or similar tax imposed on it that are associated with payments to it under the Franchise Agreement.

33.  Training Fee – Franchisor’s NSO Team:  $78,000 to $83,500

• Due Date:  Within 30 days from date of invoice.

• You will be charged for all of TGI Fridays’ (or its designee’s) costs and expenses to provide its (or its designee’s) employees for a NSO Team if you do not or cannot provide the sufficient number of your own employees.

34.  Transfer Fee:  $5,000 or such greater amount as necessary to reimburse TGI Fridays for all out-of-pocket expenses associated with the transfer

• Due Date:  With submission of transfer application and related materials.

35.  Background Investigation Fee (Transferees):  $10,000 maximum per entity and/or individual

• Due Date:  Within 30 days from date of invoice.

• The Franchise Agreement requires the franchisee to pay a background investigation fee for a proposed transferee, and any of its equity holders, who are non-United States citizens or residents.

36.  Guest Relations Program:  $6 administrative fee per incident of guest complaint on a store level basis, excluding general inquiries

• Due Date:  Within 30 days from date of invoice.

• You will be charged a monthly administrative fee per incident of guest complaint handled by TGI Fridays through the guest relations phone line, email, or post mail, in addition to the fees charged to reimburse TGI Fridays for guest complaint resolutions, i.e. free appetizer coupons, etc.

37.  Non-Compliance Fee:  1% of Gross Sales

• Due Date:  On demand, if required.

• TGI Fridays may assess a non-compliance fee for each month in which a default under the Franchise Agreement has occurred or continued for one or more days.

• The non-compliance fee compensates TGI Fridays for damage to the reputation of Fridays Restaurants, the Proprietary Marks, and the entire System.