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Considering a Bruegger’s Bagels Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on November 7, 2017

in Bagel Franchise, Franchise Fees

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Bruegger's Bagel Photo by Doogie51

If you are considering a Bruegger’s Bagels franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of Bruegger’s Bagels’ 2017 FDD).

1.  Development Fee:  $10,000 for each of the first three Bakeries that you commit to open plus $5,000 for each additional Bakery in excess of three that you commit to open

  • When you sign the Development Agreement, you must pay Bruegger’s Bagels a non-refundable fee (“Development Fee”) based on the number of Bakeries that you commit to open in the Development Area in accordance with your Development Schedule.
  • The Development Fee is $10,000 for each of the first three Bakeries that you commit to open plus $5,000 for each additional Bakery in excess of three that you commit to open. This formula is uniform for all new developers.
  • Bruegger’s Bagels will negotiate with you the number of Bakeries that you must develop, but the minimum number is three, unless Bruegger’s Bagels waives this requirement in order to grant a single-unit franchise to add a new Bakery in an already-developed market.
  • You will sign a Franchise Agreement for each Bakery as you develop them.

2.  Franchise Fee:  $30,000

  • Upon signing each Franchise Agreement, you will pay Bruegger’s Bagels an initial franchise fee (“Franchise Fee”) of $30,000.
  • Bruegger’s Bagels will apply $10,000 of the Development Fee toward the initial franchise fee for the first three Bakeries that you open under the terms of your Development Agreement, until the Development Fee has been exhausted, with the balance of the Initial Franchise Fee payable when you sign the Franchise Agreement.

3.  License Fee (Non-Traditional Locations):  $20,000

  • If you enter into a License Agreement with Bruegger’s Bagels, you must pay a non-refundable initial license fee of $20,000.
  • You must pay the initial license fee in full when you sign the License Agreement.

4.  Standard Royalty:  5% of Gross Sales

  • Due Date:  Weekly.

5.  Royalty for Company-Owned Bakeries Acquired from BEI Under the Refranchising Program:  0%-5% of Gross Sales

  • Due Date:  Weekly.
  • Bruegger’s Bagels has predetermined an adjusted royalty rate for many of the company-owned Bakeries being offered for sale by BEI. These Bakeries have not previously been subject to a royalty.
  • The reduced royalty rate will be in effect for a period of up to 5 years from the closing of your purchase of the Bakery or until the end of the current lease term for each acquired Bakery, whichever is less. At that time, the royalty rate will revert to the standard rate of 5%.

6.  National Marketing Fund “NMF”:  currently 1.75% of Gross Sales under the Franchise Agreement; currently 1.0% of Gross Sales under the License Agreement

  • Due Date:  Weekly.
  • You must pay this amount to an advertising and promotion fund Bruegger’s Bagels has established for the System.
  • Bruegger’s Bagels has the right to increase the NMF contribution by up to 0.25% of Gross Sales each year, subject to an overall limit of 3% of Gross Sales.

7.  Grand Opening Marketing Plan:  $10,000 to 15,000 for new or developing markets

  • Due Date:  Within 180 days of opening.
  • Bruegger’s Bagels reserves the right to require you to deposit with it the funds required for the Grand Opening marketing, to distribute as necessary to conduct the grand opening marketing plan.

8.  Local Advertising:  1.75% of Gross Sales under the Franchise Agreement

  • Due Date:  Monthly.
  • Generally, you pay vendors directly for local advertising.
  • If Bruegger’s Bagels determines that you have spent less than the required amount on local advertising, it may collect the contributions weekly.

9.  Cooperative Advertising:  up to 2% of Gross Sales

  • Due Date:  Every fourth Monday.

10.  Promotional Materials:  cost to provide the item, which Bruegger’s Bagels expects will range from $25 to $1,000

  • Due Date:  Upon delivery of the item.
  • Participation in some promotions is mandatory; in others, it is optional.

11.  BagelNet System Annual Recurring Fees:  none currently; $9,000 to $15,000 annually when new technology suite rolls out

  • Due Date:  As invoiced.
  • When Bruegger’s Bagels rolls out its new technology suite, you will begin paying annual fees for support.
  • Not applicable to Licensed Bakeries unless they use Bruegger’s Bagels’ approved technology suite.

12.  BagelNet Help Desk Services:  currently $110 per Bakery per month

  • Due Date:  Monthly by EFT.
  • You must sign an Administrative Services Agreement with Bruegger’s Bagels’ affiliate for help desk services.

13.  Online Ordering Platform:  approximately $65 per month per Bakery

  • Due Date:  Monthly.
  • Payable directly to Bruegger’s Bagels’ online platform vendor (currently Monkey Media).
  • Currently, the NMF Fund pays these fees on your behalf.

14.  Interest and Late Fees:  $100 per week plus interest on the unpaid amount at the rate of 1.5% per month or the maximum rate permitted by state law, whichever is less

  • Due Date:  Upon demand or with payment of overdue amount.
  • Bruegger’s Bagels can charge a late fee to compensate it for its administrative costs incurred in enforcing your obligation to pay it.

15.  Audit Fee:  Bruegger’s Bagels’ actual cost of audit, including travel, lodging, wages, and reasonable accounting and legal costs plus interest on any underpayment at the Default Rate

  • Due Date:  Upon demand.
  • Payable only if examination or audit reveals an underpayment of Royalties of 2% or more. This is in addition to applicable interest and late fees.

16.  Evaluate Proposed Vendor:  reasonable costs of evaluation and testing, which currently are expected to range between $2,000 and $3,000, although costs could be less than or exceed these amounts depending on the product and vendor

  • Due Date:  Upon demand.
  • Payable whether or not Bruegger’s Bagels approves the vendor.

17.  Re-Inspection Fee:  currently $500

  • Due Date:  Upon demand.
  • Payable for re-audit of your operations after you fail to pass an operations inspection.

18.  Renewal Fee:  $5,000 under the Franchise Agreement; 50% of then-current License Fee for Licensed Bakery

  • Due Date:  When you sign a successor Franchise Agreement or License Agreement.

19.  Transfer Fee:  under the Franchise Agreement, $5,000 for each Bakery being transferred; under the Development Agreement, $5,000 for a Bakery; under the License Agreement, $500

  • Due Date:  With request for approval of transfer.
  • Payable if you propose to sell or transfer your business (or partial ownership interest).

20.  Private Securities Offering:  up to $10,000

  • Due Date:  When you submit offering materials for Bruegger’s Bagels’ review.
  • For review of offering materials, Bruegger’s Bagels may impose this fee in addition to the regular transfer fee.

21.  Additional Bakery Operations Training:  $400 per day per trainer plus expenses. Expenses could range from $400 to $1,500, depending on where the training takes place and the number of training days required.

  • Due Date:  Upon completion of training.

22.  Enforcement Expenses:  Bruegger’s Bagels reasonable costs, including attorney’s fees, incurred as a result of your default

  • Due Date:  Upon demand.
  • Payable if Bruegger’s Bagels terminates the franchise based on your default or if it has to take any action to enforce your post-termination obligations.

23.  Liquidated Damages:  3 years’ worth of projected royalty fees

  • Due Date:  Upon demand.
  • Payable if Bruegger’s Bagels terminates the Franchise Agreement based on your default.

24.  Indemnification:  will vary under circumstances

  • Due Date:  As incurred.
  • You must reimburse Bruegger’s Bagels and its affiliates for any liability, loss, cost, threat, suit, or expense, including attorneys’ fees, investigative fees, and court costs which may arise out of your operation of your Bakery or your performance under any agreement with Bruegger’s Bagels, without regard to its actions (other than its intentional and willful acts or omissions).

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