If you are considering a Relax the Back franchise, don’t get blindsided by these 14 important franchise fees (from the initial franchise fee, to the royalty fee, to 12 other fees found in Items 5 and 6 of Relax the Back’s 2019 FDD).
1. Initial Franchise Fee: $5,000 to $29,500
- You will pay Relax the Back an initial franchise fee of $29,500 for your first Relax the Back Store when signing the Franchise Agreement (the “Initial Franchise Fee”).
- If you served in the United States Armed Forces, you will be eligible to receive a $10,000 discount on the Initial Franchise Fee for your first location.
- The Initial Franchise Fee for your first Relax the Back Store is non-refundable, except as noted below.
- If Relax the Back terminates the Franchise Agreement because you cannot locate a site acceptable to it within the necessary timeframe or you do not successfully complete its training program, Relax the Back will refund a portion of your Initial Franchise Fee equal to the lesser of (i) one-half of the Initial Franchise Fee paid by you, or (ii) the Initial Franchise Fee minus Relax the Back’s related costs. Relax the Back’s costs may include legal fees, broker commissions, and travel and training expenses.
- For your subsequent Relax the Back Stores, the Initial Franchise Fee is (i) $10,000 due in full upon signing the Franchise Agreement, or (ii) $5,000 due upon signing the Franchise Agreement, but if the store doesn’t open within 12 months of signing the Franchise Agreement, an additional $15,000 is due and payable immediately.
- All amounts paid for subsequent locations are non-refundable and you will not be eligible for any refunds.
2. Visual Merchandising Fee: $0 to $4,000
- For all stores after your first Relax the Back Store, you must pay Relax the Back a Visual Merchandising Fee for store design and layout and travel and expense for it to come and set up your Relax the Back Store. For your first store, these services are part of your Initial Franchise Fee.
- This fee is due before you commence operations at the store and is payable in the following lump sum amounts: (1) $4,000 for a new store, (2) $3,000 if you acquire rights to an existing store that must be remodeled, or (3) $2,000 if you acquire rights to an existing store that must be remerchandised.
- The Visual Merchandising Fee is non-refundable under any circumstances.
3. Software Fee: $1,400 to $3,300
- You will pay Relax the Back an amount ranging from $1,400 to $3,300 for the initial software license fee and first year maintenance fee. Relax the Back will collect this payment from you on your first day of the initial training program. These fees are not refundable under any circumstances.
4. Initial Inventory: $5,100 to $7,000
- You will purchase an initial inventory package from Relax the Back consisting of certain seating and massage chair products in an amount ranging between $5,100 and $7,000. You will pay this fee directly to the franchisor in full at the time of delivery of the products, and the payment for the products is not refundable.
5. Continuing Royalty: if you are a new franchisee, the Continuing Royalty will vary between 2% and 5% depending on Adjusted Gross Sales during years 1 and 2, and will be 5% during year 3 and beyond. If you are an existing franchisee, the Continuing Royalty for stores beyond your first will vary between 3% and 4% of Adjusted Gross Sales during the first year of operations at the additional location, and will be 4% during year 2 and beyond.
- Due Date: By the 10th day of each month for preceding month’s Adjusted Gross Sales.
6. Marketing Fund Fee: 2% of Adjusted Gross Sales
- Due Date: By the 10th day of each month.
7. Additional Training/Conventions: will vary
- Due Date: As incurred.
- Relax the Back may require you or your manager to attend additional or ongoing training and conventions. Relax the Back may charge a fee for such additional training.
8. Transfer Fee: $7,500
- Due Date: Upon notice from you of proposed transfer.
- Relax the Back may reduce, defer, or waive this fee in individual cases.
- At Relax the Back’s option, when a new owner is granted a full 10-year franchise, a pro rated initial franchise fee may be charged.
9. Audit Costs: costs of audit, in addition to understated amounts
- Due Date: Upon receipt of invoice.
- Applies only if you fail to submit reports or you understate Adjusted Gross Sales by 2% or more.
- Includes all costs related to the inspection and audit, such as accounting and attorney fees, travel expenses, and any employee compensation.
10. Interest on Late Payments and/or Reports: maximum legal interest (18% cap)
- Due Date: Payable on demand.
- Not to exceed or violate any applicable legal restrictions.
11. Franchise Renewal Fee: 40% of then-current Initial Franchise Fee for first franchise
- Due Date: Payable with notice of election to renew not less than 6 months before expiration of franchise term.
- Non-refundable unless successor agreement is denied.
- Current policy is not to charge a franchise renewal fee, but Relax the Back can change this policy at any time.
12. Management Fees: reasonable amount; currently, these costs range from $150 to $250 per day, plus costs
- Due Date: At time of occurrence.
- In the event of your disability, death, or default by you, Relax the Back may operate the business on your behalf.
- Relax the Back may pay itself for its management services plus other costs including compensation, travel, meals, and incidental expenses of the manager.
13. Software Support Fee Plus Credit Integration/VeriFone Terminal: $225 per quarter for software support, plus monthly fee of $40-$60 for at least one VeriFone terminal
- Due Date: As incurred.
- This fee helps defray the costs associated with Relax the Back’s in-house software support team.
- Along with the software, you must utilize the credit integration that works in conjunction with the software (which requires the rental of at least one VeriFone terminal at the cost of $40 to $60 per month).
- Additionally, you will be required to use the credit card processing company that is compatible with both the software and VeriFone.
14. Insufficient Funds Fee: then-current fee, currently $100 per instance
- Due Date: As incurred.
- You must pay Relax the Back’s then-current fee any time there are insufficient funds in your designated account to cover Relax the Back’s withdrawals of amounts due under your Franchise Agreement.