Considering a Real Property Management Franchise? Don’t Overlook These 25 Important Franchise Fees

If you are considering a Real Property Management franchise, don’t get blindsided by these 25 important franchise fees (from the initial franchise fee, to the royalty fee, to 23 other fees found in Items 5 and 6 of Real Property Management’s 2019 FDD).

1.  Initial Franchise Fee:  $5,000 to $45,000

• The initial franchise fee is $45,000 for a standard Real Property Management franchise (the “Minimum Initial Franchise Fee”), which is generally granted within a centralized metropolitan area that has a population that exceeds 100,000 people.

• Real Property Management reserves the right to grant franchises to new and current franchisees within an isolated metropolitan area that has a population of less than 100,000.

• Real Property Management is a member of the International Franchise Association (“IFA”) and participates in the IFA’s VetFran Program, which provides a 15% discount on the franchise fee for veterans of the U.S. Armed Forces who meet the requirements of the VetFran Program.

• If you have an existing business with 100 or more properties under management, that business is similar to the franchise, and you merge it with the Business under the terms of the Roll-In Addendum, Real Property Management will discount the initial franchise fee by 50%.

• If you have been Real Property Management’s franchisee for at least 2 years and you purchase additional territory from it under a new Franchise Agreement, and the transaction is not subject to an arrangement with a broker, you will receive a 50% discount off the Minimum Initial Franchise Fee.

• If you have been Real Property Management’s franchisee for at least one year, you meet its established requirements, and you are approved by it, you may also purchase a franchise for a specific area with population of 60,000 or less located within a short distance (no more than a 2-hour drive) from your existing franchise location.

• The franchise fee for such franchises ranges from $5,000 to $10,000, depending on the population of the city in which the franchise is to be located, provided that to receive the reduced franchise fee, the transaction cannot be subject to an arrangement with a broker.

• Specifically, the initial franchise fee will be $10,000 for populations of 40,000 to 60,0000, $7,500 for populations of 20,000 to 40,000, and $5,000 for populations of less than 20,000 people.

• Current franchisees that wish to operate an additional franchise in these smaller population areas must be in good standing and have at least 250 units under management and have an established infrastructure.

• Real Property Management and its affiliates offer a 10% discount on the initial franchise fee to any franchisee who has been a franchisee for at least 2 years and who purchases another franchise from Real Property Management or one of its affiliates.

2.  License Fee:  the greater of (i) 7% of Gross Sales, plus 3% of Maintenance Revenues; or (ii) $250, except for “roll-in” sales

• Due Date:  15th day of each month.

3.  Marketing and Promotion (MAP) Fee:  up to 2% of Gross Sales

• Due Date:  15th day of each month.

4.  Minimum Local Marketing Spending/Advertising Coops:  the greater of: (a) $1,000 per month; or (b) 3% of your combined Gross Sales and Maintenance Revenues for the previous month

• Due Date:  Monthly.

• You must spend this amount monthly on approved local marketing and advertising of your Business.

• Real Property Management may designate local advertising markets and if designated, you must participate in and contribute to the cooperative advertising and marketing programs in your market.

• Amounts paid to an Advertising Cooperative and certain other amounts of local advertising spending will count towards the Minimum Local Marketing Spending, as more particularly set forth in the Operations Manual.

5.  System Technology Monthly Fees:  currently $128, plus (i) $15 per additional user purchased under the Lead Management Software Participation Agreement; and (ii) $5 per additional lead type purchased under the Lead Management Software Participation Agreement

• Due Date:  Monthly, when you are billed.

6.  Task Management Software Fee:  currently, $27 per user per month

• Due Date:  Monthly.

7.  Monthly BackOffice Bookkeeping Assistance Fee:  $17 per unit managed, $100 minimum. This fee may adjust to the market rates at BackOffice’s discretion. A catch-up fee may also apply.

• Due Date:  Monthly, when you are billed, beginning the month after your Franchise Agreement is signed.

• You must pay your BackOffice Bookkeeping Assistance Fee directly to Real Property Management’s affiliate, BackOffice.

8.  Monthly HelpDesk Plus Fee:  currently, $400 per month

• Due Date:  Monthly, when you are billed, beginning the month that you are no longer required to participate in the Monthly BackOffice Bookkeeping Assistance program.

• You must pay your Monthly HelpDesk Plus Fee directly to Real Property Management’s affiliate, BackOffice.

9.  Quarterly Bank Review Fee:  $350 for the first quarter; $250 for every quarter thereafter

• Due Date:  Quarterly, when you are billed, beginning the month that you are no longer required to participate in the Monthly HelpDesk Plus program.

• You must pay your Quarterly Bank Review Fee directly to Real Property Management’s affiliate, BackOffice.

10.  Fine for Marketing Outside of Territory:  $500

• Due Date:  When you are billed.

• Payable per violation if you market outside of your Territory.

11.  Annual Convention/Reunion Fees:  $1,500 to $3,000 if you attend; up to $1,000 if you fail to attend

• Due Date:  When you are billed, which may be via automatic bank draft, or within 30 days after the Annual Convention via automatic bank draft.

• Real Property Management charges you a per-person registration fee to attend the Annual Convention/Reunion. You must attend the Annual Convention/Reunion each year.

12.  Transfer Fee:  $10,000

• Due Date:  Before transfer.

• You must pay Real Property Management this fee when you sell your Business, but it may discount or waive the transfer fee if the transfer is to a legal entity you control or to a member of your immediate family.

13.  Late Fees:  $10 per day

• Due Date:  On demand.

• Applies to overdue fees from the due date until all sums are paid.

14.  Dishonored Check or ACH Draft:  $25

• Due Date:  On demand.

• You must pay Real Property Management for each check returned or ACH draft refused by your financial institution for insufficient funds in your account.

15.  Interest:  12% on unpaid balances

• Due Date:  On demand.

• Payable on all overdue amounts. The 12% charge is calculated as a per annum rate but may be collected on demand, including weekly or monthly through automatic bank draft.

16.  Failure to Maintain Insurance:  Real Property Management’s actual costs for insurance premiums and a reasonable fee for expenses Real Property Management incurs

• Due Date:  On demand.

• If you fail to maintain the required insurance coverage on your franchise, Real Property Management may acquire and pay for the insurance coverage and charge you.

17.  Audit:  cost of audit plus expenses, plus any amount owed as shown by the audit, plus interest and late fees

• Due Date:  When you are billed.

• Payable if Real Property Management makes a finding of an understatement of Gross Sales or Maintenance Revenues of 2% or more, or if you fail to provide requested information within 30 days of Real Property Management’s initial request.

18.  Renewal Fee:  $3,000

• Due Date:  On renewal.

19.  Amendment Fee:  $1,000

• Due Date:  When you are billed.

• You must pay Real Property Management a processing fee for modifications to its Franchise Agreement that are made at your request.

20.  Unapproved Suppliers:  Real Property Management’s actual out-of-pocket costs of inspection or testing

• Due Date:  On demand.

21.  Supplemental Training:  currently, $250 per day, plus your costs and expenses in attending

• Due Date:  Time of training.

• If you request or are required to repeat training in addition to the initial training program, Real Property Management reserves the right to charge you a training fee, plus you must pay your costs and expenses in connection with such training.

22.  Management and Customer Assistance:  currently, $500 per day, plus Real Property Management’s expenses

• Due Date:  When you are billed.

• You must reimburse Real Property Management if (a) it determines it is necessary for it to provide service directly to your customers; (b) you request additional assistance from it; or (c) it determines that it is necessary for it to temporarily manage your Business after a breach of the Franchise Agreement by you, or following the death or incapacity of an owner.

23.  Ongoing Training:  currently, $600 to $1,500

• Due Date:  Time of program.

• You may also be required to attend two or more ongoing training sessions per year, if offered, which will not exceed 4 days. Real Property Management may charge you a tuition fee and you must pay for your travel expenses related to such training.

• The range of the costs set forth herein is the current estimate of the tuition fee and travel expenses.

24.  Indemnification and Attorneys’ Fees and Costs:  varies according to loss

• Due Date:  On demand.

• If Real Property Management must engage an attorney to enforce its rights under the Franchise Agreement and it prevails, or if it is sued because of something you do or fail to do, you must indemnify Real Property Management and/or reimburse it for all costs, including reasonable attorneys’ fees (which may include outside counsel fees and in-house legal costs charged at rates comparable to outside attorneys), interest, court costs, and expenses expended or incurred in enforcing its rights.

25.  Tax Reimbursement:  varies according to tax

• Due Date:  When you are billed.

• You must pay Real Property Management or to taxing authorities (as applicable) an amount equal to any sales tax, use tax, gross receipts tax, documentary stamp tax, or similar tax (other than income tax), fees, or charges imposed on Real Property Management due to any required payments you make to it.