Considering a ZIPS Dry Cleaners Franchise? Don’t Overlook These 32 Important Franchise Fees

If you are considering a ZIPS Dry Cleaners franchise, don’t get blindsided by these 32 important franchise fees (from the initial franchise fee, to the royalty fee, to 30 other fees found in Items 5 and 6 of ZIPS Dry Cleaners’ 2017 FDD).

1.  Development Fee:  $10,000 for each Franchised Business that you agree to develop

• If you enter into a Development Agreement, at the time you sign that Agreement, you must pay to ZIPS a Development Fee in the amount of $10,000 for each Franchised Business that you agree to develop.

• The Development Fee is not credited against any other fees due to ZIPS, is not refundable, and is fully earned when paid.

• The highest and lowest development fees actually paid to ZIPS during its last complete fiscal year was $10,000 and $6,250, respectively, based on the fee per Franchised Business basis.

2.  Initial Franchise Fee:  $30,000 to $50,000

• The Initial Franchise Fee for your first ZIPS Dry Cleaners Business is $50,000.

• If you have not entered into a Development Agreement, but you operate at least one ZIPS Dry Cleaners Business, the Initial Franchise Fee is $30,000 for the second and each additional ZIPS Dry Cleaners Business you open.

• If you sign a Development Agreement, the Initial Franchise Fee for each ZIPS Dry Cleaners Business that you develop under the Development Agreement will be: $50,000 for the first ZIPS Dry Cleaners Business and $30,000 for each additional ZIPS Dry Cleaners Business.

• The Initial Franchise Fee must be paid to ZIPS no later than the date you sign the Franchise Agreement.

• You must pay the Initial Franchise Fee when you sign the Franchise Agreement. The Initial Franchise Fee is fully earned by ZIPS when paid, it is not credited against any other fees due to ZIPS, and is not refundable.

• The highest and lowest initial franchise fees actually paid to ZIPS during its last complete fiscal year was $30,000 and $7,500, respectively.

• ZIPS participates in the International Franchise Association VetFran Program, which provides special financial incentives to qualified veterans. If you are a qualified veteran (as specified by ZIPS), ZIPS will reduce the Initial Franchise Fee by 20% for each Franchised Business that you open.

3.  ZIPSsoft Software Initial License Fee:  $7,500

• You must pay to ZIPSsoft the initial software license fee in the amount of $7,500 (“Software License Fee”) for the ZIPSsoft Software, which is payable when you pay the remainder of the Initial Franchise Fee.

• The Software License Fee is fully earned when paid, is nonrefundable, and is not credited against any other fees.

• During 2016, the highest and lowest Software License Fee paid was $7,500 and $6,500, respectively.

4.  Architectural Plans and Services:  varies

• ZIPS will provide you a generic layout for a ZIPS Dry Cleaners Business. Your architect must develop site specific plans for the Franchised Location.

• Before you commence construction, ZIPS must review and accept the final plans.

• If you do not use an architect acceptable to ZIPS, you must reimburse ZIPS for all costs and expenses it incurs (including an hourly fee for any employee of ZIPS) to assist you with developing the plans. This amount will be due upon your receipt of an invoice from ZIPS. It cannot estimate the cost of these services.

5.  Royalty:  6% of Gross Sales

• Due Date:  Due by 8:00 AM EST on the Tuesday after the end of each fiscal week (as determined by ZIPS).

6.  Total Marketing Obligation:  5% of Gross Sales divided among the National Marketing Fund, any Regional Marketing Fund (or, any Regional Co-op), and Local Store Marketing

7.  National Marketing Fund Contribution:  up to 4% of Gross Sales; currently, 1.5% of Gross Sales

• Due Date:  Same as royalty fees.

8.  Regional Marketing Fund Contribution:  amount ZIPS determines (not to exceed 3% of Gross Sales); currently, 2.5% of Gross Sales

• Due Date:  Same as royalty fees.

9.  Regional Co-op Fee:  amount determined by the Co-op

• Due Date:  As determined by the Co-op.

• In lieu of a Regional Marketing Fund, a Regional Co-op may be established. The amount of and the payment terms for the Regional Co-op Fee will be determined by the Co-op.

10.  Local Store Marketing:  currently, 1% of Gross Sales

• Due Date:  As incurred.

• The amounts due for Local Store Marketing are payable to appropriate vendors at their specified rate.

11.  Customer Satisfaction and Retention Programs:  if implemented, all costs associated with the 800 number, secret shopper programs, loyalty and/or rewards programs, and other customer satisfaction and retention programs as ZIPS may require

• Due Date:  As incurred.

12.  Additional Training:  rates in the Manuals; currently, $500 per day, plus ZIPS’ expenses

• Due Date:  Within 30 days of receipt of invoice.

• ZIPS may require that you (or, if applicable, the Operating Principal), any Store Manager, any 10% Owner, and/or any employee whom you expect will become a Store Manager, take and successfully complete any additional training courses.

13.  Audit and Inspection Costs:  reasonable cost of the audit or inspection, including fees for attorneys and independent accountants, and the travel expenses, room, board, and compensation of ZIPS’ employees or designees

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

• Payable if an inspection or audit is made necessary by your failure to furnish reports or supporting records; or to furnish such reports, records, or information on a timely basis; or if an understatement of Gross Sales for the period of any audit is determined by any audit or inspection to be greater than 2%.

14.  Collection Costs and Expenses:  ZIPS’ 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 (including attorneys’ fees for in-house counsel employed by ZIPS or its affiliates and any attorneys’ fees incurred by ZIPS in bankruptcy proceedings); costs incurred in creating, reconciling, or replicating reports demonstrating Gross Sales of the Franchised Business; court costs; expert witness fees; discovery costs and reasonable attorneys’ fees and costs on appeal; together with interest charges on all of the foregoing.

15.  Costs and Attorneys’ Fees:  ZIPS’ costs and expenses

• Due Date:  As incurred.

• If ZIPS prevails in mediation or litigation regarding enforcement of the terms of any agreement, you must pay ZIPS’ attorneys’ fees and costs.

16.  Indemnification:  the losses and expenses incurred by ZIPS and its affiliates

• Due Date:  As incurred.

• To the extent permitted by applicable law, you must indemnify and hold ZIPS and its affiliates harmless in all actions arising out of or resulting from the development or operation of your Franchised Business.

17.  Interest:  interest on the amount owed from the date due until paid

• Due Date:  When any payment is overdue.

• The interest rate is the maximum rate permitted for indebtedness of this nature in the state in which the Franchised Business is located not to exceed 1.5% per month (or a portion of a month).

18.  Late Fee:  $500 for each delinquent payment or report

• Due Date:  On demand.

• You must pay the late fee if any payment is paid or if any report is submitted after the Due Date or if any report is submitted in the incorrect format.

19.  New Product and Supplier Testing:  reasonable cost of the inspection and the actual cost of the test

• Due Date:  As incurred.

• If you propose to purchase any materials (that you are not required to purchase from ZIPS, an affiliate of ZIPS, or a designated supplier) from a supplier that ZIPS has not previously approved, you must submit to ZIPS a written request for such approval, or request the supplier to do so itself.

• ZIPS has the right to require, as a condition of its approval, that its representatives be permitted to inspect the supplier’s facilities, and that such information, specifications, and samples as ZIPS reasonably designates be delivered to it and/or to an independent, certified laboratory designated by it for testing prior to granting or refusing to grant approval.

20.  Reimbursement of Insurance Costs:  ZIPS’ out-of-pocket costs of obtaining coverage

• Due Date:  Immediately upon receipt of invoice.

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

21.  Relocation:  greater of actual expenses or $10,000

• Due Date:  Prior to any relocation.

• You may not relocate the Franchised Business without ZIPS’ prior written consent, which may be withheld by it in its sole discretion.

• ZIPS may condition its approval upon the payment of an agreed minimum royalty to it during the period in which the Franchised Business is not in operation.

22.  Renewal Fee:  $10,000

• Due Date:  At the time you sign the renewal Franchise Agreement.

• The renewal fee is in addition to any costs for remodeling that ZIPS may require as a condition of renewal.

23.  Software Updates:  actual cost of updates

• Due Date:  As incurred.

• The Franchise Agreement gives ZIPS the right to require you to purchase and use any new or upgraded proprietary software programs, system documentation Manuals, and other proprietary materials that ZIPS may develop in the future.

24.  Taxes:  you must reimburse ZIPS for any taxes, fees, or assessments imposed on it for acting as franchisor or licensing the Marks

• Due Date:  Within 30 days of receipt of invoice.

25.  Transfer:  $10,000

• Due Date:  Prior to consummation of transfer.

• There is no fee if you transfer to a corporation or limited liability company that you control. Transfers, however, are subject to ZIPS’ prior consent.

26.  ZIPSsoft Software Ongoing License Fee:  $300

• Due Date:  Quarterly.

• This fee is payable to ZIPSsoft for the license to use the ZIPSsoft Software.

27.  ZIPSsoft Software Ongoing Maintenance and Support Fee:  $300

• Due Date:  Monthly.

• This fee is payable to ZIPSsoft for maintenance and support services.

28.  Non-compliance Fee:  $500 for first violation in 12-month period, $750 for second violation, and $1,000 for third violation

• Due Date:  As incurred.

• If, after ZIPS notifies you, you fail to comply with the System standards, ZIPS may charge you a fee.

29.  Customer Service:  all costs incurred in assisting your customers

• Due Date:  Upon demand.

• If ZIPS determines it is necessary to provide services directly to your customers, you must reimburse it for all costs and expenses it incurs.

30.  Customer Complaints:  reasonable costs and expenses

• Due Date:  Upon demand.

• If ZIPS resolves any customer complaints, you must pay all reasonable costs and expenses it incurs.

31.  Additional Optional Operations Assistance:  rates as in the Manuals; currently, $500 per day, plus ZIPS’ expenses

• Due Date:  Upon demand.

• If you request any additional assistance, you must pay ZIPS this fee.

32.  Initial Training Program – Training Fee:  ZIPS charges this fee only if you send more than 2 people to the initial training program. Then-current fee, currently $150 per day, per person.

• Due Date:  Before training commences.

• ZIPS does not charge you a fee to send 2 people to its initial training program; however, if any additional, replacement, subsequent, or substitute personnel attend the training, ZIPS may charge you a fee.

• If you do not employ at least 2 people who have attended and been certified by ZIPS in the initial training program, ZIPS may charge you a penalty fee.