Considering a Big Apple Bagels/My Favorite Muffin Franchise? Don’t Overlook These 29 Important Franchise Fees

If you are considering a Big Apple Bagels/My Favorite Muffin franchise, don’t get blindsided by these 29 important franchise fees (from the initial franchise fee, to the royalty fee, to 27 other fees found in Items 5 and 6 of Big Apple Bagels/My Favorite Muffin’s 2018 FDD).

1.  Initial Franchise Fee:  $15,000 to $25,000

• Your first Big Apple Bagels/My Favorite Muffin Store must be a Big Apple Bagels/My Favorite Muffin Production Store. You must pay an initial non-refundable franchise fee of $25,000 for your first Big Apple Bagels/My Favorite Muffin Production Store, payable upon execution of the Franchise Agreement.

• For the second and subsequent Big Apple Bagels/My Favorite Muffin Production Stores, the franchise fee will be $20,000.

• The initial franchise fee for a Big Apple Bagels/My Favorite Muffin Satellite Store franchise is currently $15,000, payable upon execution of the Franchise Agreement.

• To provide support to past veterans and current veterans being released from active service, the franchisor offers all qualifying veterans a discount of $10,000 from the initial franchise fee of $25,000 for your first Big Apple Bagels/My Favorite Muffin Production Store franchise.

• This discount does not apply to the Satellite Store franchise, or to your second or subsequent franchises.

2.  Area Development Fee:  determined by multiplying the aggregate Minimum Development Quota by $5,000

• The franchisor charges a non-recurring and non-refundable Development Fee which you must pay in a lump sum when you sign the Area Development Agreement. This fee is determined by multiplying the aggregate Minimum Development Quota by $5,000 (but not counting your first Big Apple Bagels/My Favorite Muffin Production Store).

• Developer is required, if he is not already a Big Apple Bagels/My Favorite Muffin franchisee, to sign 1 Franchise Agreement and pay the $25,000 franchise fee, simultaneously with the execution of the Area Development Agreement.

• With respect to each Big Apple Bagels/My Favorite Muffin Production Store or Big Apple Bagels/My Favorite Muffin Satellite Store the Developer opens under the Area Development Agreement, he must sign the franchisor’s then-current standard Franchise Agreement and pay the initial franchise fee shown above.

• The Development Fee is not applied to the franchise fees for each unit developed. The initial franchise fees for Big Apple Bagels/My Favorite Muffin Production Stores opened by Developer are $15,000 for the second and subsequent Big Apple Bagels/My Favorite Muffin Production Store and $10,000 for each Big Apple Bagels/My Favorite Muffin Satellite Store opened by Developer.

3.  Royalty Fee:  5% of Gross Revenues

• Due Date:  Every Wednesday for the preceding Reporting Week (Monday through Sunday).

• Gross Revenues is the entire amount of all gross sales and business receipts, including direct or indirect barter transactions, catering accounts, wholesale accounts (both on and off premises) from the operation of the Store, whether for cash or credit. Does not include sales, use, or service taxes or customer refunds and approved rebates, discounts, and allowances.

• You must make payments by electronic bank draft.

4.  Marketing Fund Contribution:  3% of Gross Revenues, subject to increase by the franchisor but not to exceed 5% of Gross Revenues

• Due Date:  Every Wednesday for the preceding Reporting Week.

• Gross Revenues calculated in the same manner as for Royalty Fee, except that receipts from wholesale accounts are excluded.

5.  Marketing Deposit:  $7,500 for Production Store; $3,000 for Satellite Store; $1,000 for a transferee

• Due Date:  Upon signing Franchise Agreement.

• The Marketing Deposit will be used in connection with your grand opening as well as for local advertising for your Store during the initial few months of operation.

6.  Transfer Fee:  $5,000 for Production Store and Satellite Store

• Due Date:  Before transfer.

• Payable if you sell a controlling interest in your franchise.

• If a proposed sale is not completed, you must reimburse the franchisor for its reasonable expenses relating to the transfer request.

• You cannot transfer a Satellite unless your buyer has a Production Store to supply it.

7.  Additional Fee if Transfer is to Franchisor’s Existing Prospect:  10% of sale price, not to exceed then-current initial franchise fee

• Due Date:  Before transfer.

• Payable if you transfer your franchise to a person with whom the franchisor had prior contact with respect to a franchise opportunity.

8.  Document Name Change Fee:  $250

• Due Date:  Upon franchisor’s approval to change franchisee’s name on Franchise Agreement.

• Payable if you request and the franchisor approves any alteration, addition, or modification in the name or identity of the franchisee on your Franchise Agreement.

9.  Renewal:  $2,500

• Due Date:  30 days after billing.

• Payable if you renew your franchise at the end of the initial term.

10.  Additional Assistance:  varies

• Due Date:  As incurred.

• Payable only if the franchisor provides operating assistance as a result of your failure to comply with any provision of the Franchise Agreement or any specification, standard, or operating procedure prescribed by the franchisor, or if you request operating assistance in excess of what the franchisor normally provides.

11.  Testing:  $1,000 to $5,000

• Due Date:  30 days after billing.

• To cover costs for testing products, supplies, or materials you request the franchisor to approve.

12.  Relocation Expenses:  costs

• Due Date:  30 days after billing.

• Payable if you want to relocate your Store.

13.  New Manager Training:  $1,500

• Due Date:  Due before training.

• If you request the franchisor to train your new Store Manager, you must pay this fee.

14.  Penalty for Default in Paying Fees:  $100 per day

• Due Date:  Beginning on 15th day after default.

• You must pay a $100 per day penalty if you fail to pay amounts when due.

15.  Penalty for Default in Reporting Gross Revenues:  $10 per day

• Due Date:  Beginning on 8th day after default.

• You must pay a $10 per day penalty if you fail to report Gross Revenues. You must report your Gross Sales electronically (email).

16.  Penalty for Default in Submitting Register Tapes or Reports, Financial Statements, or Tax Returns:  $100 per day

• Due Date:  Beginning on 15th day after default.

• You must pay $100 per day penalty if you fail to submit POS System tapes or reports, financial statements, or tax returns when due.

• If you are opening a new Store, your POS System will not have paper tapes. Register tapes apply only to existing Stores that were not required to have the current POS System.

17.  Penalty for Failure to Properly Use Proprietary Products:  $100 per day

• Due Date:  On demand, beginning on the 1st day of default.

• You must pay a $100 per day default if you fail to properly use proprietary products at your Store as specified in the Franchise Agreement and/or Operations Manual.

18.  Penalty for Failure to Comply With Specific Operating Standards:  $100 per day

• Due Date:  On demand, beginning on the 1st day of default.

• You must pay a $100 per day penalty if your Store fails to comply with the following specific Operating Standards: (i) all employees wearing required uniforms; (ii) using approved suppliers; (iii) complying with the insurance requirements; and (iv) always having a manager in the Store who has been trained to the franchisor’s satisfaction.

19.  Penalty for Unauthorized Use of Marks:  $100 per day

• Due Date:  On demand, beginning on the 1st day of default.

• You must pay a $100 per day penalty if you make any unauthorized use of the Marks in any manner or in any media, including but not limited to signage, menus, advertising, or internet, and including unauthorized use during the term of the Franchise Agreement, or subsequent to its expiration or termination for any reason.

20.  Assessment for Electronic Bank Draft Being Dishonored:  $25 or $50

• Due Date:  On demand.

• You must pay a $25 assessment fee for each of the 1st 3 times in any calendar year an electronic bank draft the franchisor attempts is dishonored, due to insufficient funds or a change in your bank account; after the 1st 3 transactions per calendar year, the assessment fee is $50 each.

21.  Audit:  cost of examination or audit, including charges of independent accountants and travel expenses, room and board, compensation of the franchisor’s employees

• Due Date:  30 days after billing.

• If audit is necessary due to your failure to furnish reports or if audit shows an underreporting of 2% or more of Gross Revenues.

22.  Interest:  lower of 2% per month or highest contract rate allowed by law

• Due Date:  Upon billing.

• On late payments. The franchisor may compound interest on a monthly basis.

23.  Reimbursement of Local or State License Fees:  costs

• Due Date:  30 days after billing.

• Payable if the franchisor pays for licenses required by the Franchise Agreement when you fail to do so.

24.  Management Fee:   $250 per day, subject to increase

• Due Date:  30 days after billing.

• Payable if the franchisor appoints a manager for the Store when the Store is not being managed by you or a qualified manager.

25.  Attorneys’ Fees and Costs:  varies

• Due Date:  As incurred.

• Payable to the franchisor if it prevails in any action.

26.  Additional Assistance:  varies

• Due Date:  As incurred.

• Payable only if the franchisor provides operating assistance as a result of your failure to comply with any provision of the Franchise Agreement or any specification, standard, or operating procedure prescribed by the franchisor, or if you request operating assistance in excess of what the franchisor normally provides.

27.  Indemnification:  varies

• Due Date:  As incurred.

• You must reimburse the franchisor for any liability or cost incurred by it by reason of your operation of the Store or your offer or sale of securities.

28.  Liquidated Damages:  5% times average Gross Revenues over previous 36 months, discounted
to present value based on 4% interest

• Due Date:  On demand.

• Payable if you terminate without good cause, if the franchisor terminates for cause, you abandon your Store, or you transfer it without the franchisor’s consent.

29.  Royalty Fee After Franchise Expires:  1% of Gross Revenues

• Due Date:  Every Wednesday for the preceding Reporting Week (Monday through Sunday).

• If you fail to sign the Renewal Franchise Agreement after the expiration of the Initial Term, and you continue to accept any of the benefits of the franchise, you must pay the franchisor a royalty fee equal to 7% of your Gross Revenues.