Considering a Cost Cutters Franchise? Don’t Overlook These 18 Important Franchise Fees

Updated December 5, 2018.

If you are considering a Cost Cutters franchise, don’t get blindsided by these 18 important franchise fees (from the initial franchise fee, to the royalty fee, to 16 other fees found in Items 5 and 6 of Cost Cutters’ 2018 FDD).

1.  Initial Franchise Fee:  $12,500 to $39,500

• The initial franchise fee depends on whether you are a new or existing franchisee. The following schedule sets forth the franchise fee structure:

• Single franchise fee is $39,500.

• If you were a Cost Cutters franchisee prior to September 30, 2011, the franchisee fee is $12,500.

• You will have 12 months from the date of signing your Franchise Agreement to open your Cost Cutters Business.

• Regis is a member of the International Franchise Association (“IFA”) and participates in IFA’s VetFran Program, which provides special financial incentives to qualified veterans.

• If you are a veteran of the United States armed forces, have been honorably discharged, otherwise meet the requirements of the VetFran Program, and this is your very first franchise of any Regis-owned brand, then you will receive a $2,500 rebate on your initial franchise fee after you open your first store.

• This rebate opportunity is not available per brand but only to your first Regis brand franchise overall.

2.  Fast Start Program:  $49,500 for 2-store development to $139,500 for 6-store development

• Cost Cutters provides an incentive program by offering a Development Agreement for franchisees willing to commit to open 2, 3, 4, 5, or 6 Cost Cutters Businesses within a designated time.

• The Development Fee you must pay for multi-store development under the Fast Start Program currently is:

• $49,500 for 2-store development
• $69,500 for 3-store development
• $79,500 for 4-store development
• $89,500 for 5-store development
• $139,500 for 6-store development

• If you acquire development rights for more than 6 stores, the Development Fee will be $10,000 for each additional store.

• In multi-store development, Cost Cutters allocates $39,500 to the first store and the remaining Development Fees as follows: For 2-store development, Cost Cutters allocates $10,000 to the second store. For 3-5 store development, Cost Cutters allocates $20,000 to the second store and $10,000 to each additional store up to 5. For 6-store development rights and above, Cost Cutters allocates $20,000 to the second and each additional store up to 6, then $10,000 to each store above 6.

• The Development Fee is due upon executing the Development Agreement (and Franchise Agreement for the first store to be developed under the Development Agreement).

• Upon paying the applicable Development Fee under the Fast Start Program, you will not be required to pay any additional initial franchise fees at the time you execute Cost Cutters’ then-current Franchise Agreement(s) to operate the Cost Cutters Businesses you contracted to open and operate under the terms and conditions of the Development Agreement.

• You will be given 12 months from the date of signing your first Franchise Agreement to open your first Cost Cutters Business. Your second and subsequent Cost Cutters Business(es) are required to be open 18 months from the date the immediately prior Cost Cutters Business is required to be open. If you have not met the terms of this program, you may lose the development rights to any unopened Cost Cutters Business.

3.  Store Furniture, Fixtures, and Equipment (FF&E) Coordination Services:  $25,000 to $50,000

• Regis is an approved supplier of services relating to your Cost Cutters Business’ development and build-out.

• The FF&E coordination services involve Regis ordering on your behalf furniture, fixtures, and equipment for your Store and coordinating delivery, and consulting with you regarding the unloading, initial inspection, and acceptance, of all of the furniture, fixtures, and equipment on the Cost Cutters Business’ approved construction documents.

• If you want to use Regis’ FF&E Coordination services, you must sign Regis’ Construction Management Services Agreement. Regis will order the FF&E required for your Cost Cutters Business and coordinate the suppliers’ invoices to you for this FF&E.

• You must pay Regis the amounts the suppliers charge for the FF&E, plus shipping and handling, and Regis will coordinate payment of the suppliers for that FF&E. The total cost of this FF&E is estimated to range from $25,000 to $50,000 depending on the size of your Cost Cutters Business. This payment is not refundable.

4.  Construction Management Services:  $5,000

• The Cost Cutters Business construction management services include the FF&E coordination services described above plus various consulting services regarding construction estimates; construction-related lease requirements; sign package requirements and the sign review/approval process; general contractor bidding and selection (you select the general contractor); obtaining building permits; site conditions and work progress; FF&E operation, maintenance, and trouble-shooting; producing a punch-list of open issues; construction warranty work; and obtaining occupancy approval.

• You must pay Regis $5,000 for the Cost Cutters Business construction management services when you sign its Construction Management Services Agreement. This $5,000 fee is in addition to the amounts described in the previous paragraph that you must pay for FF&E plus shipping and handling. These payments are not refundable.

5.  Continuing Fees:  Weeks 1 through 52: 4% of Gross Revenues; Week 53 through end of Franchise Agreement Term: 6% of Gross Revenues or $100 per week, whichever is greater

• Due Date:  Wednesday of each week for the preceding week.

• Cost Cutters collects a 4% Continuing Fee for the first 52 weeks that you operate your Cost Cutters Business. The Continuing Fee increases to 6% as of the 53rd week of operation.

• Beginning with the 53rd week of operation, a minimum Continuing Fee of $100 per week is payable.

• Cost Cutters requires you to pay these fees by direct bank transfer to Cost Cutters’ bank account.

6.  Advertising Fees:  4% of Gross Revenues

• Due Date:  Wednesday of each week for the preceding week.

• Cost Cutters requires you to pay these fees by direct bank transfer to Cost Cutters’ bank account.

• Cost Cutters provides you with monthly statements indicating Advertising Fee payments, obligations, and credits.

• An accounting of expenditures made by Cost Cutters’ advertising fund is distributed to franchisees two times per year.

7.  Other Advertising:  at least 1% of Gross Revenues

• Due Date:  As negotiated with local advertising suppliers.

• You must provide Cost Cutters with quarterly reports of your local advertising expenditures.

• If there are two or more franchisees in your Designated Market Area (“DMA”), Cost Cutters may require you to become a member of a local advertising group.

• Cost Cutters does not have voting control over any local advertising groups.

• Your payments to a local advertising group will apply toward your 1% local advertising requirement.

8.  Grand Opening Advertising:  $8,000

• Due Date:  During the first 60 days of operating your Cost Cutters Business.

• Expenditures apply toward your 1% local advertising requirement.

• You must spend a minimum of $8,000 for Grand Opening Advertising for your first Store; $2,500 for each Store thereafter.

9.  Engineering Drawings Fee:  $2,000 to $5,000

• Due Date:  Within 5 days of receipt of an invoice.

• This is an optional service Regis will provide to you upon request.

• If the city, county, or state where your Cost Cutters Business is located requires engineering drawings in order to issue a building permit and/or to comply with building codes, Regis will contract consultants necessary to prepare engineering drawings for you.

10.  Relocation Architectural Plans:  $0 to $5,000

• Due Date:  Within 5 days of receipt of an invoice.

• Basic Floor Plans for new Cost Cutters Businesses are provided to you at no cost. If you relocate your Cost Cutters Business, Regis will contract consultants necessary to prepare new architectural plans upon your request for this fee.

11.  Tax Reimbursement:  reimbursement of Cost Cutters’ tax payments

• Due Date:  When billed.

• You must reimburse Cost Cutters for taxes it must pay due to your operations (including any sales tax and/or gross receipts tax Cost Cutters must pay based on Continuing Fees and/or Advertising Fees paid or payable by you but not including income taxes paid by Cost Cutters on account of your Continuing Fees and Advertising Fees).

12.  Remodel Plan Review Fee:  $1,000 to $2,500

• Due Date:  Prior to commencement of remodeling or construction.

13.  Reimbursement of Audit Costs:  dependent upon the costs incurred by Cost Cutters in conducting an audit

• Due Date:  Within 5 days of receipt of an invoice.

• Audit costs must be reimbursed if an audit shows that you understated your Gross Revenues by more than 2% or underpaid Continuing Fees by more than $500 in any 12-month period.

14.  Annual Conventions:  currently $375 to $1,500 per person attending

• Due Date:  Registration fee is due upon registration to attend convention, and other costs are due as incurred.

• You must attend an annual system-wide convention. In addition to the registration fee payable to Cost Cutters, you must pay your travel, lodging, and food expenses.

15.  Transfer Fee:  $500 to $2,500

• Due Date:  Before transfer.

• If you transfer your Cost Cutters Business, you must pay a Transfer Fee of $2,500 to Cost Cutters.

• If you simultaneously transfer more than one Cost Cutters Business, then you must pay to Cost Cutters a Transfer Fee of:  $2,500 for 1st Business; $2,000 for 2nd Business; $1,500 for 3rd Business; $1,000 for 4th Business; $500 for 5th Business and each additional Business.

16.  Lease Renewal Fee:  $1,500

• Due Date:  Immediately upon execution of the lease renewal.

17.  Interest Charges:  18% per annum simple interest or the maximum legal rate allowable in the state in which your Business is located, whichever is less

• Due Date:  On demand.

• Applies to past due payments of Continuing Fees, Advertising Fees, or other payments due to Cost Cutters.

18.  Electronic Communications Fee:  up to $500 per year

• Due Date:  Within 5 days of receipt of an invoice indicating amount owed.

• If obtained through Cost Cutters, you will reimburse Cost Cutters for the affiliated fees.