Considering a Lennys Grill & Subs Franchise? Don’t Overlook These 22 Important Franchise Fees

If you are considering a Lennys Grill & Subs franchise, don’t get blindsided by these 22 important franchise fees (from the initial franchise fee, to the royalty fee, to 20 other fees found in Items 5 and 6 of Lennys Grill & Subs’ 2017 FDD).

1.  Initial Franchise Fee:  $20,000 to $25,000

• If you sign a Franchise Agreement for a Lennys Grill & Subs, you must pay Lennys an initial franchise fee (“Initial Franchise Fee”) of $25,000 for the rights to operate one Lennys Grill & Subs.

• The Initial Franchise Fee is fully earned upon receipt by Lennys and is non-refundable under any circumstances.

• Except as provided below, the Initial Franchise Fee is uniform to all franchisees under the franchise offering. During the previous fiscal year, Lennys collected Initial Franchise Fees that ranged from $20,000 to $25,000.

• If you have been employed as a manager of any Lenny’s Sub Shop or Lennys Grill & Subs for at least two years and Lennys grants you the right to operate one or more Lennys Grill & Subs, you must pay an Initial Franchise Fee of $20,000 for each Restaurant for which you sign a Franchise Agreement.

• Lennys participates in the International Franchise Association’s VetFran and MinorityFran programs, and the Initial Franchise Fee is $20,000 for a prospective franchisee who is either a veteran of the United States Armed Forces or a qualified ethnic minority.

• If Lennys offers you the right to sign an Area Development Agreement to develop and operate additional Restaurants and you enter into an additional Franchise Agreement for each additional Restaurant, you may pay reduced Initial Franchise Fees (which fee includes an exclusive area fee) of up to 33% off of the Initial Franchise Fee.

• A copy of the Development Fee Matrix setting forth the exact discounts is attached to the 2017 Disclosure Document as Exhibit H.

• All fees paid as required by an Area Development Agreement are fully earned upon receipt by Lennys and are non-refundable under any circumstances.

2.  Royalty:  6% of weekly Gross Sales

• Due Date:  Payable weekly on the Tuesday of the following week through Electronic Depository Transfer Account (“E-Transfer Account”).

3.  Brand Marketing Fund:  currently, 2% of weekly Gross Sales

• Due Date:  Payable weekly on the Tuesday of the following week through E-Transfer Account.

4.  Local Advertising Expenditures:  currently, 2% of weekly Gross Sales

• Due Date:  When due to third parties or, when designated by Lennys for a local cooperative or specific event, payable weekly on Tuesdays of the following week through E-Transfer Account.

5.  Additional On-Site Training at Franchised Location:  $300 per day, plus expenses

• Due Date:  Payable on the Tuesday following the week in which the training has occurred.

• In the event you cannot attend training programs in Memphis, TN, and as a result your training must occur at your franchised Restaurant, this is the amount charged.

6.  Continuing Operations Training:  your expenses as well as your employees’ expenses

• Due Date:  Time of program.

• Attendance will be required no more than twice a year, and training will last no more than a total of 4 days per year.

7.  POS Network Connection and Software Maintenance Fee:  $591 to $631

• Due Date:  Payable monthly.

• Lennys utilizes a PC-based POS system and this is the monthly fee for network connection and maintenance.

8.  LEARN Maintenance Fee:  $50

• Due Date:  Payable monthly.

• Lennys utilizes a Web-based training system and this is the monthly fee for maintenance.

9.  Renewal Fee:  $5,000

• Due Date:  Payable upon your request to renew your Franchise Agreement.

• Fee is to pay for your rights to use the System and trademarks for an additional 10 years, as well as to defray Lennys’ costs of preparing necessary documentation and reviewing your qualifications.

10.  Transfer Fee:  $7,500

• Due Date:  Time of transfer.

• Transfer includes sale, assignment, lease, gift, or other disposition.

11.  Audit Fee:  cost of audit and interest on any underpayments at the rate of 1½% per month or highest applicable legal rate, whichever is lower

• Due Date:  30 days after billing.

• Payable only if Lennys’ audit of your records shows an understatement of at least 2% of Gross Sales for any single reporting period.

12.  Late Fees:  1½% per month or highest applicable legal rate, whichever is lower

• Due Date:  After due date.

• Applies to all fees due Lennys and its affiliates.

13.  Operation of Franchised Restaurant by Lennys or Its Appointee in Case of Default:  $500 per day, plus expenses

• Due Date:  Payable daily out of Restaurant proceeds.

• In addition to Lennys’ right to terminate the Franchise Agreement, it may operate your Restaurant if you fail to cure a default or commit a breach that has no cure period.

14.  Daily Fine in Case of Default:  $200 per day

• Due Date:  Payable daily through E-Transfer Account.

• In addition to Lennys’ right to terminate the Franchise Agreement and in lieu of it operating your Restaurant, Lennys may fine you $200 per day if you fail to cure a default or commit a breach that has no cure period.

15.  Operation of Franchised Restaurant by Lennys or Its Appointee in Case of Your Absence, Incapacity, or Death:  $500 per day, plus expenses

• Due Date:  Payable daily out of Restaurant proceeds.

• Prevents harmful interruption or depreciation of the franchised Restaurant in case of your absence, incapacity, or death.

16.  Failure to Attend Annual Franchise Summit:  $2,500

• Due Date:  Payable through E-Transfer Account.

17.  Relocation:  all costs incurred by you, plus all reasonable costs incurred by Lennys, not to exceed $10,000

• Due Date:  Upon relocation.

• Relocation of your Restaurant is at your cost. Additionally, Lennys has the right to charge you for any and all reasonable costs that it incurs in respect of and in considering whether to approve your relocation, not to exceed $10,000.

18.  Cost of Enforcement or Defense:  all costs including attorneys’ fees

• Due Date:  Upon settlement or conclusion of claims or action.

• You will reimburse Lennys for all costs or fees in enforcing obligations or defending any claim concerning the Franchise Agreement if it prevails.

• Awarded to the prevailing party in an arbitration, but not a mediation.

19.  Liquidated Damages:  twice the amount of your royalties for the preceding 364 days

• Due Date:  Upon certain terminations of the Franchise Agreement.

20.  Insurance Policies:  estimated annual premium is $5,000

• Due Date:  When due.

• Minimum insurance amounts are required.

• Payable to Lennys if you fail to procure the required insurance coverage.

21.  Indemnification:  all costs including attorneys’ fees

• Due Date:  When due.

• You will, at Lennys’ option, pay for Lennys to defend or defend suits at your own cost and hold Lennys harmless against suits involving damages resulting from the operation of your Restaurant or relating to the sale of securities in your business entity.

22.  Guaranty:  varies

• Due Date:  Upon breach of the Franchise Agreement.

• You must personally guaranty and comply with all terms of and will be liable for any breach of the Franchise Agreement.