If you are considering a McAlister’s Deli franchise, don’t get blindsided by these 42 important franchise fees (from the initial franchise fee, to the royalty fee, to 40 other fees found in Items 5 and 6 of McAlister’s Deli’s 2017 FDD).
1. Initial Franchise Fee: $15,000 to $35,000
- You must pay McAlister’s Deli an initial franchise fee (the “Initial Franchise Fee”) when you sign your Franchise Agreement.
- The Initial Franchise Fee for an Express Restaurant is $15,000 and for a Traditional Restaurant is $35,000.
- For calendar year 2016, the Initial Franchise Fee ranged from $10,000 to $35,000.
- In certain rare circumstances, McAlister’s Deli may permit installment payments of the Initial Franchise Fee on terms negotiated with the franchisee.
2. Royalty Fee: 5% of Net Sales
- Due Date: Payable on or before Tuesday of each week on the Net Sales for the previous week (or on any other basis stated in the Manuals or in McAlister’s Deli’s written notice to you).
3. Advertising Contribution: currently, 0.75% of Net Sales, but it may be increased to up to 3.0% of Net Sales
- Due Date: Same as Royalty.
- You must make advertising contributions to the Ad Fund (the “Advertising Contribution”).
- McAlister’s Deli may increase the Advertising Contribution by notice to franchisees up to 3% of Net Sales at any time.
4. Advertising Cooperative Contribution: an amount set by your Advertising Cooperative
- Due Date: Same as Royalty.
- All members of an Advertising Cooperative, whether a franchisee-owned, company-owned, or affiliate-owned Restaurant, have voting rights on matters brought before the Advertising Cooperative for a vote, including matters relating to the amount of the required Advertising Cooperative contribution.
5. Local Marketing Obligation: each calendar quarter, you must spend not less than 1% of Net Sales on local market advertising
- Due Date: Each calendar quarter.
- You will determine the amount of funds you spend for individual local market advertising, subject to the minimum.
- Amounts you contribute to an Advertising Cooperative for your Restaurant will be credited toward your required Local Marketing Obligation.
- If you fail to make the minimum advertising expenditures, McAlister’s Deli may do so on your behalf and you must reimburse it for its expenses.
6. Promotions: costs to purchase, lease, and install all materials necessary for promotional campaigns, including counter cards, posters, banners, signs, photographs, give-away items, and gift cards. McAlister’s Deli may charge you its costs, plus a reasonable administrative fee.
- Due Date: As incurred.
- You will participate at your own cost in promotional programs that McAlister’s Deli establishes, and the promotional programs will be applicable to the System as a whole or to specific advertising market areas.
- You also will participate in promotional programs your Advertising Cooperative establishes.
7. EFT NSF Fee: McAlister’s Deli’s out-of-pocket costs and an administrative fee
- Due Date: On invoice.
- If McAlister’s Deli drafts money from your account under its electronic funds transfer (“EFT”) or draft system, and there are insufficient funds (“NSF”) to cover the draft, it will charge you the return costs charged by its bank and an administrative fee to cover its costs of addressing the nonpayment.
- This fee is in addition to interest on the amount due.
8. Interest: 1.5% per month or maximum legal interest rate
- Due Date: On invoice.
- You must pay McAlister’s Deli or its affiliates interest on any amounts past due to it or its affiliates.
9. Late Fee for Reports, Financial Statements, or Tax Returns: $100 per day
- Due Date: On invoice.
- You must pay this late fee if you fail to submit timely, complete, and accurate reports, financial statements, and tax returns when due.
10. Taxes: McAlister’s Deli’s cost
- Due Date: On invoice.
- You must pay McAlister’s Deli all taxes (except its income taxes) it pays for products or services it furnishes to you, or on its collection of the Initial Franchise Fee, Royalty, and Advertising Contribution from you.
11. Subsequent Trainee Initial Training Fee: currently, up to $500 per trainee
- Due Date: Before attending training.
- You pay this fee only if you appoint a new Primary Contact, Manager, or other employee that McAlister’s Deli designates after your Restaurant opens.
12. On-Site Training and Assistance: a reasonable fee, currently $50 per hour per trainer, plus trainers’ travel and living expenses
- Due Date: On invoice.
- At any time, you can request on-site training and assistance above that which McAlister’s Deli must provide. McAlister’s Deli has no obligation to provide onsite training or assistance.
13. Additional Support/Consulting Fee: a reasonable fee; currently, $500 per day, plus travel and living expenses
- Due Date: On invoice.
- McAlister’s Deli may offer you consultation services beyond the support services under the Franchise Agreement, and if you accept them, it can charge you a consulting fee.
14. Conferences Program Fee: a reasonable fee, which will vary by program
- Due Date: As incurred.
- McAlister’s Deli may charge you a reasonable fee for any conferences, conventions, programs, or training sessions that it conducts.
- McAlister’s Deli expects these fees to range from $0 to $2,500.
15. Training Cancellation Fee: McAlister’s Deli’s out-of-pocket costs
- Due Date: On invoice.
- If you fail to cancel scheduled training at least 14 days prior to such training or if you are not prepared to successfully complete training, McAlister’s Deli may charge you the cost of conducting the originally scheduled training (including any travel and living expenses incurred by its representatives) and may require you to pay an additional fee for rescheduled training.
16. Electronic Learning Management System: amount of fees. McAlister’s Deli estimates the cost will be $500 to $750 annually.
- Due Date: As incurred; payable to McAlister’s Deli or third party vendor.
- McAlister’s Deli may require you to implement an electronic learning management system for manager certification and employee training.
17. Supplier/Product Evaluation Fee: the greater of $2,500 or the actual cost of the supplier/product evaluation process
- Due Date: On invoice.
- Payable if you recommend new suppliers, products, and/or services to McAlister’s Deli, and it evaluates, tests, and/or inspect the suppliers, products, and/or services.
18. Rent: will vary based on location and other factors; McAlister’s Deli estimates rent will range from $4,500 to $20,000 per month
- Due Date: First day of every month; payable to McAlister’s Deli or an affiliate or third-party landlord.
- McAlister’s Deli or an affiliate may own the premises or hold the prime lease for the premises and rent or sublease the premises of your Restaurant to you.
19. Relocation Extension Fee: another Initial Franchise Fee of $1,500 per year of extension on term
- Due Date: Before McAlister’s Deli signs relocation Franchise Agreement.
- If you relocate to a new site and extend the term based on your new lease, you must pay to extend the term.
20. Lease Renewal Fee: McAlister’s Deli’s then-current fee; currently, $2,000
- Due Date: As incurred.
- McAlister’s Deli reserves the right to charge you a fee if you renew your lease or if your lease is extended by a landlord for a period of 12 months.
21. Lease Documentation Fee: $500 for each failure
- Due Date: As incurred.
- McAlister’s Deli may charge you this fee if you fail to provide it with a signed copy of any lease or a modification, amendment, or renewal of a lease.
22. Transfer Fee: 50% of the then-current Initial Franchise Fee if it is a Control Transfer; if it is a transfer to a related party or that is a non-Control Transfer, 10% of the then-current Initial Franchise
Fee
- Due Date: At transfer closing.
- Payable to McAlister’s Deli if you transfer your Franchise Agreement or Restaurant. Fee compensates McAlister’s Deli for its expenses and work.
- A Control Transfer occurs if an interest of more than 20% of the ownership interests in you is transferred or the transfer results in a change in control of the entity.
23. Renewal Fee: 10% of the then-current Initial Franchise Fee
- Due Date: Before McAlister’s Deli signs renewal Franchise Agreement.
- Payable to McAlister’s Deli if you enter into a renewal term.
24. Computer Systems Fee: a reasonable fee, which will vary based on the services provided
- Due Date: As needed.
- Paid to contractors, or McAlister’s Deli or its affiliates, as applicable.
- The amount for upgrades and maintenance varies based on the extent of the upgrade or services provided.
25. POS System Support Fee: currently, estimated not to exceed $200 per month
- Due Date: As incurred.
- The support service includes help desk support, trouble shooting, menu management, and collection of sales data from your POS System overnight.
26. Back Office and Polling Software Fee: approximately $126 per month
- Due Date: As incurred.
- You must remit this fee to McAlister’s Deli, its affiliate, or a third party vendor that provides the back office and polling software for your Computer System.
27. Credit Card Fees: equipment costs and set up fees estimated to be up to $700 per terminal. Transaction fees estimated to be from 2.5% to 5.0% of transaction amounts. Other fees may apply depending on the vendor used for credit card processing.
- Due Date: As incurred; payable to McAlister’s Deli or third party vendor.
28. PCI Compliance Service Fee: equipment cost and setup fees are estimated at $70 per month. Professional installation fees are $250.
- Due Date: As incurred; payable to McAlister’s Deli or third party vendor.
29. Gift Card and Loyalty Program Fees: amount of fees
- Due Date: As incurred; payable to McAlister’s Deli, its affiliate, or third-party vendor.
- You must purchase and offer gift cards and loyalty cards (and related equipment) from McAlister’s Deli’s designated gift card and loyalty card vendors.
30. Purchasing Program Fee: reasonable membership fees assessed by the Purchasing Program
- Due Date: As incurred.
- If McAlister’s Deli designates or establishes any purchasing and/or distribution cooperatives/associations/programs (“Purchasing Programs”), you must become a member and pay any membership fees assessed.
- McAlister’s Deli currently does not have any Purchasing Programs which require membership fees.
31. Supply Chain Fee: currently, $0.25 to $0.35 per case purchased through certain Appointed Distributors
- Due Date: As incurred.
- FSC collects this fee from certain Appointed Distributors from whom you may purchase products and services, to offset expenses that FSC incurs managing the supply chain.
32. Development Deadline Extension Fee: $2,500 per missed deadline
- Due Date: On invoice.
- Payable if you fail to meet the Site Approval Deadline, Construction Start Deadline, or Opening Deadline, or if McAlister’s Deli grants you an extension to any of these deadlines.
33. Failure to Comply with Standards or Law Fee: up to a $5,000 fee, plus McAlister’s Deli’s reasonable expenses connected with any inspection, examination, or analysis of products
- Due Date: On invoice.
- Payable if McAlister’s Deli’s inspection of products shows the products have been adulterated in any way or that your Restaurant does not comply with applicable laws.
34. Repeated Inspection Fee: cost of inspection
- Due Date: On invoice.
- If McAlister’s Deli or its representative inspects you as a result of your repeated or continuing failure to comply with any provision of the Franchise Agreement, you must pay McAlister’s Deli the cost of the inspection, including the travel and living expenses of its representatives.
35. Restrictive Covenant Violation Fee: $2,500 for an hourly employee; $5,000 for an assistant manager; $7,500 for a manager or general manager; and $10,000 for a corporate employee
- Due Date: On invoice.
- Payable if you hire an employee of McAlister’s Deli or its affiliates in violation of your restrictive covenants, in addition to any other remedies McAlister’s Deli may be entitled.
36. Audit: cost of audit
- Due Date: On invoice.
- If McAlister’s Deli audits you and finds that you understated Net Sales by 2% or more, you must reimburse it all reasonable expenses connected to the audit, review, or examination (including any reasonable accounting and attorneys’ fees).
- McAlister’s Deli estimates that the typical audit costs would be approximately $1,000 to $4,000.
37. Liquidated Damages: the average monthly amount of Royalty that you owed McAlister’s Deli during the past 36 months, times the lesser of remainder of term of Franchise Agreement or 36 months
- Due Date: Within 30 days of termination of your Franchise Agreement.
- You must pay this fee only if the termination occurs after the opening date of your Restaurant and you are not insolvent at the time of termination.
- If less than 36 months have passed since opening and termination, the amount will be the average monthly Royalty during the time between opening and termination, times the lesser of remainder of the term of the Franchise Agreement or 36 months.
38. Appraiser’s Fee: 50% of appraiser’s fee
- Due Date: On invoice.
- You must pay this fee only if McAlister’s Deli elects to purchase your assets on termination or expiration of the Franchise Agreement and it cannot agree with you on the purchase price.
39. Indemnification: McAlister’s Deli’s cost
- Due Date: On invoice.
- You indemnify McAlister’s Deli from certain losses and expenses under the Franchise Agreement.
40. Attorneys’ Fees: McAlister’s Deli’s cost
- Due Date: On invoice.
- It McAlister’s Deli becomes a party to a proceeding on an agreement between it and you, and it wins, or if it becomes a party to litigation or insolvency proceedings for your franchise, then you must pay McAlister’s Deli’s reasonable attorneys’ fees and court costs.
41. Reinstatement Fee: 10% of the amount of the then-current Initial Franchise Fee, plus Royalty Fees that would have been payable in period between termination and reinstatement
- Due Date: Before reinstated.
- If McAlister’s Deli terminates your Franchise Agreement due to a health and safety default, you cure the default and want to be reinstated, and McAlister’s Deli agrees to reinstate your Franchise Agreement, you must pay it a reinstatement fee.
42. De-identification Fee: McAlister’s Deli’s actual costs, plus interest and an administrative fee equal to 15% of its actual costs
- Due Date: On invoice.
- Payable if McAlister’s Deli terminates the Franchise Agreement, you fail to de-identify the Restaurant, and McAlister’s Deli makes the required changes on your behalf.
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