If you are considering a Pokéworks franchise, don’t get blindsided by these 15 important franchise fees (from the initial franchise fee, to the royalty fee, to 13 other fees found in Items 5 and 6 of Pokeworks’ 2018 FDD).
1. Initial Franchise Fee: $25,000 to $35,000
- Upon signing a Pokéworks Franchise Agreement (“Franchise Agreement”), you must pay a lump sum (“Initial Franchise Fee”) of $35,000. The Initial Franchise Fee is deemed fully earned by Pokéworks upon receipt and is not refundable under any circumstances.
- You must sign a separate Franchise Agreement for each Pokéworks Restaurant you operate and pay the applicable Initial Franchise Fee when the Franchise Agreement is signed.
- At Pokéworks’ sole discretion, it may offer qualified candidates a Multiple Unit Development Agreement, under which the Multiple Unit Developer obtains the right to develop and operate a prescribed number of Pokéworks Restaurants subject to the opening deadlines in a specific Development Schedule.
- Under a Multiple Unit Development Agreement, you must commit to developing a minimum of 3 Pokéworks Restaurants in which the Multiple Unit Developer owns substantially all of the equity interests.
- Pokéworks does not grant sub-franchises or the right to enter into sub-franchise relationships. In all cases, the Initial Franchise Fee is deemed fully earned by Pokéworks upon receipt and is not refundable under any circumstances.
- If you enter into a Multiple Unit Development Agreement, the Initial Franchise Fee for the first Pokéworks Restaurant you commit to develop is currently $35,000; the Initial Franchise Fee for the second Pokéworks Restaurant you commit to develop is currently $30,000; and the Initial Franchise Fee for the third and any subsequent Pokéworks Restaurant you commit to develop is currently $25,000.
- The Multiple Unit Development Agreement requires the developer to sign Pokéworks’ then-current form of Franchise Agreement, which may materially differ from the Franchise Agreement included with this Franchise Disclosure Document, and may charge an Initial Franchise Fee that differs from Pokéworks’ current Initial Franchise Fee.
2. Multi-Unit Development Deposit: the full Initial Franchise Fee for the first Pokéworks Restaurant you commit to develop, plus 50% of the Initial Franchise Fees for all subsequent Pokéworks Restaurants you commit to develop. The minimum due at signing is $62,500.
- When you enter into the Multiple Unit Development Agreement, you must pay to Pokéworks the full Initial Franchise Fee for the first Pokéworks Restaurant you commit to develop, plus 50% of the Initial Franchise Fees for all subsequent Pokéworks Restaurants you commit to develop. The minimum due at signing is $62,500.
- All such amounts collected by Pokéworks will be deemed fully earned immediately upon receipt and shall be non-refundable, regardless of whether you open any of the Pokéworks Restaurants you are obligated to open in the Development Territory.
- You must pay to Pokéworks the remaining 50% of the Initial Franchise Fee for each subsequent Pokéworks Restaurant when you (or your affiliate) has executed a Letter of Intent (“LOI”) with the landlord that corresponds to the respective Pokéworks Restaurant.
3. Royalty Fee: 6% of Gross Sales
- Due Date: Deducted from your bank account via electronic funds transfer on the Wednesday of each week or as determined by Pokéworks.
- “Gross Sales” includes all revenue generated by your Pokéworks Restaurant and does not include any sales taxes collected by you.
4. Marketing Fund Contribution: 1.5% of Gross Sales
- Due Date: Deducted from your bank account via electronic funds transfer at the same time your Royalty Fee is deducted.
5. Manager Training or Retraining Costs: $500 to $1,500
- Due Date: As incurred.
- Payable when a new manager needs training and/or upon Pokéworks’ determination that you require additional training.
6. Successor Franchise Fee: $12,500
- Due Date: Upon the extension of your rights to operate the Pokéworks Restaurant.
- Payable before you execute your Successor Franchise Agreement.
7. Transfer Fee: 50% of Pokeworks’ current Initial Franchise Fee for a single unit franchise at the time of the transfer
- Due Date: Upon transfer.
- Payable when you transfer your franchise.
8. Fee for Lost Operations Manual: $500
- Due Date: Upon delivery of new Operations Manual or transfer of your Pokéworks Restaurant.
9. Audit Fee: cost of audit estimated at $500 to $3,500
- Due Date: As incurred.
- Payable only if audit shows an understatement of at least 2%.
10. Late Fees: lesser of 10% of balance past due after 30 days or the highest rate allowed by law
- Due Date: With payment of overdue amount.
11. Technology Fee: currently, $200 per month
- Due Date: Deducted from your bank account via electronic funds transfer on the 10th day of each month.
12. Costs of Enforcement or Defense: all costs, including reasonable accounting and legal fees
- Due Date: Upon settlement or conclusion of claim or action.
- You must reimburse Pokéworks for all costs it incurs in enforcing its obligations under the Franchise Agreement if it prevails.
13. Indemnification: varies
- Due Date: As incurred.
- You must pay the costs to defend and resolve claims and suits against Pokéworks at your cost involving or resulting from your Pokéworks Restaurant.
14. Liquidated Damages: 24 (or the number of months remaining in the term) multiplied by your Average Monthly Royalty Fees and Marketing Fund Contributions for the 12 months preceding termination
- Due Date: 10 days after Franchise Agreement termination.
- Payable if the Franchise Agreement terminates before the expiration of the term unless you exercise your Performance Termination Right.
15. Non-Compliance Fees: Administrative Violations – $500 for first violation, $350 for each additional violation. Training Violations – $1,500. Operating Violations – $350 for first violation, $600 for second violation, $1,500 for each additional violation that occurs in a calendar year.
- Due Date: Paid within 10 days of receipt of notice from Pokéworks of a violation of the Franchise Agreement.
- Pokéworks sets the fee structure and circumstances in the Operations Manual for:
- (i) Administrative Violations – failure to meet a deadline for delivery of required documentation or proof of compliance such as the signed lease for the Store;
- (ii) Training Violations – failure of Designated Manager or others to attend or complete mandatory information and training sessions;
- (iii) Operating Violations – failure to operate the Franchised Restaurant and file reports in compliance with the Franchise Agreement, Pokéworks’ standards, and the Operations Manual.
- Pokéworks may waive the Non-Compliance Fee for the first violation in any calendar year.