Considering an Einstein Bros. Bagels Franchise? Don’t Overlook These 22 Important Franchise Fees

Updated January 28, 2019.

If you are considering an Einstein Bros. Bagels 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 Einstein Bros. Bagels’ 2018 FDD).

1.  Area Development Fee:  $10,000 for each Restaurant to be opened under the Area Development Agreement

• If you are going to be a Developer, then you will sign an Area Development Agreement and pay Einstein Bros. Bagels a non-refundable area development fee in the amount of $10,000 for each Restaurant to be opened under the Area Development Agreement.

• The area development fee will be due in a lump sum upon the signing of an Area Development Agreement.

• Payment of the area development fee will be in addition to the payment of initial franchise fees upon the execution of Franchise Agreements for the Restaurants developed under the Area Development Agreement, and Einstein Bros. Bagels will credit you $10,000 from the area development fee toward the initial franchise fee required under the Franchise Agreement for each Restaurant that you timely open according to the Development Schedule (so long as you have met your obligations under the Area Development Agreement and any Franchise Agreements already in effect).

• The total of the credits available to be applied to your initial franchise fees will be the total that you have paid to Einstein Bros. Bagels in area development fees.

2.  Initial Franchise Fee:  $25,000 to $35,000

• For each Restaurant required to be opened under the Area Development Agreement, the initial franchise fee will be:

• (a) $25,000 if that Restaurant is opened more than 30 days before the date required under the Development Schedule; and
• (b) $35,000 if that Restaurant is opened 30 days before, on, or any time after the date required under the Development Schedule.

• The initial franchise fee under a Franchise Agreement is $35,000, and must be paid in full when the Franchise Agreement is signed. If there is a credit available from your area development fee (as described above), then that credit will be applied to reduce your payment.

• The initial franchise fee will be fully earned when paid, must be paid in one lump-sum amount, excluding any required deposits, and will not be refundable.

3.  Design Review Fee:  $2,500

• Before Einstein Bros. Bagels begins its review of your proposed drawings and plans for the Franchised  Business, you must pay Einstein Bros. Bagels a Design Review Fee in the amount of $2,000 if you select a previously unapproved architect or contractor to prepare drawings for the Restaurant.

4.  Product Purchases:  $4,000 to $10,000

• In addition to the fees described above, you may also choose to buy some items from Einstein Bros. Bagels or from its affiliates, directly or indirectly (for example, through distributors). These may include equipment, your opening inventory of proprietary products, and marketing materials.

• Your purchases of these items are likely to total approximately $4,000 to $10,000.

5.  Initial License Fee (Under License Agreement):  $10,000 to $12,500

• If you enter into a License Agreement with Einstein Bros. Bagels, you must pay it an initial license fee in the amount of $12,500. (The initial license fee is reduced to $10,000 for certain Licensed Restaurants operated on U.S. military bases.)

• The initial license fee must be paid in full when the License Agreement is signed. The initial franchise fee will be fully earned when paid, must be paid in one lump-sum amount, excluding any required deposits, and will not be refundable.

• The initial fees collected from new licensees are uniform.

6.  Royalty:  5% of Gross Sales under the Franchise Agreement; 6.5% of Gross Sales under the License Agreement (reduced to 4% of Gross Sales for airport locations)

• Due Date:  Franchise Agreement – Weekly, on or before Friday of each week, calculated on the Gross Sales for the prior week. License Agreement – On or about the 15th day of each month.

7.  Marketing Contribution:  4% of Gross Sales under the Franchise Agreement

• Due Date:  Same as Royalty.

8.  Grand Opening Marketing Program:  $10,000 under the Franchise Agreement

• Due Date:  Within 6 months after you open your Franchised Restaurant.

• Spent to promote the grand opening of your Restaurant. You must submit a marketing plan for Einstein Bros. Bagels’ review and approval.

• Einstein Bros. Bagels may require you to deposit the funds with it to distribute as needed to conduct the Grand Opening Marketing Program.

9.  Transfer Fee:  Franchise Agreement: 50% of Einstein Bros. Bagels’ then-current initial franchise fee; License Agreement: 50% of the then-current initial license fee

• Due Date:  At time of transfer.

• Only due if you make a transfer (as defined in the Agreement), which includes the sale of your franchise or license, your company, or any party’s interest in your company.

10.  Interest on Overdue Amounts:  1.5% per month on the underpayment

• Due Date:  Upon demand.

• Only due if you don’t pay Einstein Bros. Bagels the amounts you owe on time. Interest will be charged only on overdue amounts and will start to accrue on the date when the payment was originally due.

11.  Late Fee:  License Agreement: 15% of amount due, plus any bank charges

• Due Date:  Upon demand.

• Under the License Agreement, you must pay this fee for each required payment not made on or before its original due date, and for each payment not honored by your financial institution.

12.  Costs and Attorneys’ Fees:  will vary under circumstances

• Due Date:  On demand.

• Only if you are in default under the Franchise Agreement or License Agreement, in which case you must reimburse Einstein Bros. Bagels for the expenses it incurs (including reasonable attorneys’ fees) as a result of your default and to enforce and terminate the Agreement.

13.  Supplier Testing:  will vary

• Due Date:  Upon demand, if incurred.

• Only payable if you propose a new supplier, and Einstein Bros. Bagels inspects the supplier or tests the supplier’s products, in which case Einstein Bros. Bagels may charge you or the supplier for its costs in conducting those inspections or running those tests.

14.  Audit Costs:  all costs and expenses associated with the audit, reasonable accounting and legal costs

• Due Date:  Upon demand.

• Only payable if Einstein Bros. Bagels audits because you did not submit sales statements or keep books and records, or if you under-report your sales or underpay your royalties by 2% or more.

• You will also have to pay interest on the underpayment.

15.  Indemnity:  will vary under circumstances

• Due Date:  As incurred.

• You must indemnify Einstein Bros. Bagels, and reimburse it for its costs (including its attorneys’ fees):  (a) if it is sued or held liable in any case having anything to do with your business operations; (b) for any securities offering you propose or undertake; or (c) if if has to defend against a claim or pay damages because you made unauthorized or improper use of the Proprietary Marks.

16.  Reinspection Fee:  an amount not to exceed $1,500

• Due Date:  As incurred.

• If Einstein Bros. Bagels inspects the Restaurant and determines that it is not operating in compliance with the Franchise or License Agreement and all System standards and it must re-inspect to determine whether you have corrected the operating deficiencies, it may require you to pay it this fee for each reinspection of the Restaurant.

17.  Securities Offering Fee:  under the Franchise Agreement, $7,500 or Einstein Bros. Bagels’ actual expenses, whichever is more

• Due Date:  Upon demand.

• Only payable if you make a public or private securities offering, in which case you must reimburse Einstein Bros. Bagels for its reasonable costs and expenses (including legal and accounting fees) to evaluate your proposed offering, and you also must indemnify it.

18.  Additional Training and Onsite Assistance:  $350 per trainer per day, plus Einstein Bros. Bagels’ per diem charges and its out-of-pocket costs

• Due Date:  Upon demand.

• Only payable if you ask that Einstein Bros. Bagels send trainers to your Restaurant for additional training or request onsite assistance, and it does so, then you will have to pay its trainers’ expenses and its then-current fee for such services.

19.  Additional and Replacement Certified Manager Personnel Training:  $1,600 under the Franchise Agreement, and $850 under the License Agreement, for each additional individual to be trained. Einstein Bros. Bagels’ personnel’s wages, per diem charges, and travel, hotel, and living expenses under the License Agreement.

• Due Date:  Before training begins.

• Einstein Bros. Bagels will train, at its expense, up to two Certified Managers. If you want to send additional individuals to the initial training program, the training fee will be $850 (for Licensed Restaurants) and $1,600 (for Franchised Restaurants) for each additional individual to be trained.

• Also, if you ask to send more than three Certified Managers to a replacement training session, or if you request more than two replacement training sessions during the term of the Franchise Agreement, then you must pay Einstein Bros. Bagels this same amount for each person to be trained. You will be responsible for paying for all of your employees’ costs and expenses.

20.  Renewal Fee:  Franchise Agreement: 10% of the then-current initial franchise fee; License Agreement: 10% of the then-current initial license fee, or $1,250, whichever is more

• Due Date:  Before renewal.

• Only payable if you decide to renew the franchise on the terms that are described in the Agreement. The renewal fee is instead of a new initial franchise fee or initial license fee.

21.  Lost Future Royalties:  will vary, but is calculated based on the average of your monthly Royalty Fees in the Franchise Agreement

• Due Date:  As incurred.

• If Einstein Bros. Bagels terminates the Franchise Agreement based on your default, or if you abandon or otherwise cease to operate the Franchised Business, you must pay Einstein Bros. Bagels for lost future royalties.

22.  System Support Fees and Approved Software Fees (Franchised Restaurants Only):  $300 to $500 per month

• Due Date:  As incurred.

• Einstein Bros. Bagels has the right to develop itself, have developed for itself, or designate certain third-party computer software programs and web-based programs and applications that you must use in connection with the operation of your Restaurant (“Approved Software”), and you may be required to pay initial and ongoing fees in order to install and continue to use the Approved Software.

• This also includes the fees and costs associated with the Catering Program if Einstein Bros. Bagels establishes that program.