Considering a Huddle House Franchise? Don’t Overlook These 33 Important Franchise Fees

Updated February 11, 2019.

If you are considering a Huddle House franchise, don’t get blindsided by these 33 important franchise fees (from the initial franchise fee, to the royalty fee, to 31 other fees found in Items 5 and 6 of Huddle House’s 2018 FDD).

1.  Initial Franchise Fee:  $35,000

• The initial franchise fee for a 15-year Standard Unit Franchise (the “Initial Franchise Fee”) is $35,000 for a new franchise, unless either (a) you qualify for the veteran’s discount, or (b) you are an existing franchisee purchasing an additional Unit.

• If Huddle House’s initial training program is not completed to its satisfaction, it can terminate your Franchise Agreement. If it terminates your Franchise Agreement for this reason, you will be entitled to a partial refund in an amount equal to 50% of your Initial Franchise Fee, less any costs and expenses incurred by Huddle House in training you and your managerial personnel, and in reviewing, approving, and supervising the development of your franchise.

2.  Training Fee:  $4,990

• You must also pay a training fee to Huddle House in connection with the initial training program that it provides. The training fee is currently $4,990, although Huddle House may change this fee in the future. The training fee is payable before you begin construction of your Huddle House Restaurant.

3.  Development Fees:  $35,000 for the first New Development Unit to be developed and $17,500 for all other New Development Units that you must develop under the Development Schedule

• If you enter into Huddle House’s standard form of Market Development Agreement, you can develop an agreed upon number of franchises within a Territory according to a Development Schedule. If you enter into a Market Development Agreement, you must pay Huddle House a development fee equal to the total of (a) $35,000 for the first New Development Unit to be developed and (b) $17,500 for all other New Development Units that you must develop under the Development Schedule (collectively, the “Development Fees”).

4.  Security Deposits:  varies

• You must also pay to Huddle House a security deposit that will range from $7,500 to $15,000 depending on your credit history, and may be adjusted by Huddle House from time to time. This deposit is payable before you begin construction of your Huddle House Restaurant.

• If you will lease the premises of your Huddle House Restaurants from Huddle House, you will be required to pay to Huddle House an additional security deposit equal to one month’s rent applicable in the first year, which ranges from $1,500 to $7,500. This deposit is payable before you begin construction of your Huddle House Restaurant. (Together these security deposit payments to Huddle House are referred to in the Disclosure Document as the “Security Deposit”.)

• The balance of the Security Deposit will be returned to you when your Franchise Agreement or Lease Agreement expires, so long as you have complied with all of the terms of the Franchise Agreement or Lease Agreement and all other agreements between you and Huddle House (including payment of all sums due).

5.  Royalty:  4.75% of the Net Sales

• Due Date:  Every week.

• Huddle House may require that you make payments by electronic funds transfer (“EFT”).

6.  Contribution to Advertising Fund:  3.0% of the Net Sales

• Due Date:  Every week to Huddle House or its designee.

• Huddle House may require that you make payments by EFT.

• This amount may increase to an amount not to exceed 4% of Net Sales, although it will not increase more than 1% in any given year.

7.  Local Advertising Requirement:  0.5% of the Net Sales

• Due Date:  On demand.

• Every quarter, you must spend a minimum of 0.5% of the Net Sales on qualified local advertising and marketing activities (the “Local Advertising Requirement”), and must submit (by the 10th day of the following quarter) receipts and other reports that Huddle House may reasonably request to evidence your expenditure.

8.  Transfer:  varies – 25% of Huddle House’s then-current Initial Franchise Fee, or $2,000, or no fee

• Due Date:  Upon transfer.

• 25% of then-current Initial Franchise Fee applies if you sell your franchise or engage in a transfer involving more than 51% ownership interests.

• $2,000 fee applies if you transfer to your majority-owned corporation or an immediate family member.

• There will be no fee if you transfer to an entity owned solely by you, during the first year after signing the Franchise Agreement.

9.  Interest on Rent:  5% per month on overdue amount

• Due Date:  Monthly.

• Payable if you are more than 15 days late on payment of any rent owed to Huddle House.

10.  Interest on Payments (other than rent):  lesser of 18% per annum or maximum legal rate

• Due Date:  Monthly.

• Payable if you are more than 5 days late paying any amount owed to Huddle House (other than rent).

11.  Management:  8% of the Net Sales

• Due Date:  Weekly.

• Payable while Huddle House manages your franchise due to your death or incapacity.

12.  Liquidated Damages – Employee:  $40,000

• Due Date:  On demand

• Payable if you employ a Huddle House employee contrary to the terms of the Franchise Agreement.

13.  Liquidated Damages – Breach and Termination:  $145,000 or three years of estimated Royalties, whichever is greater

• Due Date:  On demand.

• Payable if you breach your Franchise Agreement and it is terminated by Huddle House.

14.  Food and Supplies:  $1,000 to $18,000

• Due Date:  Every two weeks.

• Payable if you buy food and/or supplies from Huddle House.

15.  Music Delivery System:  currently $25 to $39/month

• Due Date:  Monthly, or as provider requires.

16.  Fees Relating to Computer System, Software, and Technology Services:  will vary

• Due Date:  Upon demand.

17.  Central Billing Fee:  will vary, but not currently in effect

• Due Date:  Upon demand.

18.  Non-Participation/Non-Reporting Fee:  $100 for first month; $200 for second month; $300 for third month

• Due Date:  Upon demand.

19.  Delinquent Report:  $10

• Due Date:  When report is submitted.

• Payable if you do not deliver any report to Huddle House when due.

20.  Audit:  interest at 12% or highest rate allowed by law, if higher

• Due Date:  Upon request.

• Payable if an audit of your books shows an understatement of your Net Sales that is 1.5% or more.

21.  Renewal:  25% of then-current Initial Franchise Fee

• Due Date:  Before first day of renewal term.

• Must be paid for each renewal.

22.  Huddle House Performance:  reimbursement of amount, plus 12% interest (or highest rate allowed by law if to pay creditors)

• Due Date:  Promptly after payment by Huddle House (with next Royalty Fee payment if for insurance).

• Payable if you fail to perform maintenance obligations, pay creditors, or procure insurance, and Huddle House does so for you.

23.  Additional or Refresher Training and Orientation:  will vary

• Due Date:  Prior to attending training.

24.  Extension of Opening Deadline or Deadline in Development Schedule:  $5,000 per month that the deadline is extended

• Due Date:  Before extension of deadline.

25.  Extension of Term of Development Agreement:  varies – $5,000 per additional year, per Unit in Development Schedule

• Due Date:  At time you and Huddle House agree to an extension.

• Applies only if you request to extend the term of the Development Agreement beyond the end of the Development Schedule.

26.  Addition to Security Deposit:  $7,500 to $10,000

• Due Date:  Upon demand.

• Huddle House may require this payment if you are delinquent on payment obligations one or more times.

27.  Fee for Closing During Any Required Hours of Operation:  $1,000 per day that the Huddle House Restaurant is not open during all required hours of operation

• Due Date:  Upon demand.

28.  Rejected Payment Fee:  Huddle House’s then-current rejected payment fee (currently, $100 per occurrence)

• Due Date:  Upon demand.

29.  Lease Review:  up to $2,500

• Due Date:  Upon demand.

• Huddle House may require that your proposed lease for the Unit be reviewed by an attorney that it designates.

30.  Fees for Financial Report:  $12.50 per month for program service fee, and $10 fee if you fail to submit report

• Due Date:  Monthly for program service fee and upon demand for missing report fee.

• Huddle House requires Huddle House Units to use a web-based application for reporting profit and loss and related financial information to it through a designated vendor (currently PLAT by iLumen).

• The service fee for this program and fees for failing to submit reports (if applicable) are payable to Huddle House.

31.  Fee for Non-attendance at Conferences:  $2,500

• Due Date:  At the same time as your Royalty for the week immediately following the missed mandatory conference.

32.  Unit Hours Modification Fee:  varies – up to 7.75% of the Base Amount, which will be determined by the Unit’s Net Sales during the immediately preceding 52 weeks for the open hours being modified

• Due Date:  Currently monthly, but not more often than weekly.

• You must keep your franchise open and in normal operation during all mandatory hours of operation. Huddle House has the right to modify the mandatory hours of operation, including to require a 24 hour, 7 days a week, schedule.

• At this time, the mandatory hours are all hours of each day except 12:00 a.m. (midnight) until 6:00 a.m., Monday through Thursday.

• In some circumstances, Huddle House may allow existing franchisees (or their transferees) to modify their Unit hours for agreed upon periods if certain conditions are met. These conditions may include: payment of the Unit Hours Modification Fee, remaining in compliance with the Franchise Agreement, removal of any 24-hour signage or marketing materials, and signing an amendment to the Franchise Agreement in the form that Huddle House provides.

33.  Customer Feedback Program:  will vary. Includes a monthly fee (which Huddle House currently pays), and (if any) additional visits conducted due to low survey scores (currently, $85 per additional visit)

• Due Date:  Monthly for standard monthly fee, and upon demand for additional inspections (if required).