Considering a Property Management Inc. Franchise? Don’t Overlook These 19 Important Franchise Fees

If you are considering a Property Management Inc. franchise, don’t get blindsided by these 19 important franchise fees (from the initial franchise fee, to the royalty fee, to 17 other fees found in Items 5 and 6 of Property Management Inc.’s 2019 FDD).

1.  Initial Franchise Fee:  $15,000 to $50,000

• The initial franchise fee (“Franchise Fee”) depends on the type of franchise you purchase, as detailed below:

• The initial Franchise Fee is $40,000 for a “Standard Territory” (population of 100,000 or above). The Franchise Fee is $35,000 for a “Local Territory” (population below 100,000).

• For non-U.S. residents who have or are obtaining E-2 Investor Visas, the Franchise Fee for a Standard Territory and a Local Territory is $50,000.

• The Franchise Fee for an existing property management company (“EPMC”), whether the EPMC is located in a Standard Territory or a Local Territory, is based on the existing gross revenue for the EPMC at the time of becoming a franchisee, and is as follows:

• a. $40,000 for gross monthly revenues below $2,000;
• b. $35,000 for gross monthly revenues between $2,001 to $5,000;
• c. $30,000 for gross monthly revenues between $5,001 to $20,000;
• d. $25,000 for gross monthly revenues between $20,001 to $35,000;
• e. $20,000 for gross monthly revenues between $35,001 to $75,000; and
• f. $17,500 for gross monthly revenues above $75,001.

• “Door(s)” means a Residential or Commercial space with a physical address that may be rented, leased, or sold.

• “Unit(s)” means an individual space with a physical address that is located within an Association.

• “Key(s)” means a Residential space with a physical address that is rented as a Short-Term Rental.

• The Franchise Fee for an existing EPMC that converts to a Property Management Inc. franchise and is granted the right to be a regional mentor, meaning an individual or entity assigned by the franchisor that will help coach and support other franchisees (“Regional Mentor(s)”), is $15,000.

• The Franchise Fee for multiple Territories is the full Franchise Fee for the first Territory, with a 20% discount on the Franchise Fee of the next 4 Territories, up to a total of 5 Territories.

• The Franchise Fee must be paid in full by wire transfer or certified check when you sign the Franchise Agreement. Once you have signed the Franchise Agreement, no portion of the Franchise Fee is refundable to you.

• The Franchise Fee is payment, in part, for expenses incurred by Property Management Inc. to furnish assistance and services to you, as set forth in the Franchise Agreement, and for costs incurred by it, including general sales and marketing expenses, training, legal, employee, office, accounting, and other general and professional fees.

2.  Royalty:  (i) 3.0% of Brokerage, plus (ii) a tiered percentage of Gross Revenue (the greater of 6% or $300 on Gross Revenue up to $35,000; plus 5% of Gross Revenue from $35,001-$75,000; plus 4% on Gross Revenue above $75,001)

• Due Date:  Payable monthly; due on the 15th of each calendar month.

• The fees shall be automatically debited from your bank account via electronic funds transfer (“EFT”).

• The term “Brokerage” means all revenues, fees, and commissions paid to, or value received by, the Business or its affiliates, in accordance with buying or selling real estate.

3.  National Advertising Fee, if implemented:  2.0% of Gross Revenue

• Due Date:  Once established, payable monthly; due on the 15th of each calendar month.

4.  Local Advertising:  minimum of $1,500 per month (Digital Marketing Program counts toward the $1,500 per month minimum)

• Due Date:  As required, according to marketing channels used, but any amounts owed to Property Management Inc. are due on the 1st of each calendar month.

5.  PMiBOOKS Bookkeeping Program:  minimum monthly fee is presently: (i) for Doors, the greater of (a) $10-$15 per Door managed or (b) $100 plus an initial $300 setup and processing fee; (ii) for Units, the greater of: (a) 20% of the management fee the franchisee is paid for managing Units or (b) $100 plus an initial $2.50 per Unit setup fee; and (iii) for Keys, the greater of (a) 8% of the management fee the franchisee is paid for managing Keys or (b) $100 plus a $100 per Key setup fee

• Due Date:  Mandatory until you have completed all training and assignments deemed necessary for you to demonstrate the ability to manage your company’s bookkeeping; payable monthly on the 1st day of each calendar month.

6.  PMiSOFT Software (for franchisees that manage Residential and/or Commercial properties):  presently, one-time setup fee of $300; no per Door monthly fee

• Due Date:  Payable upon setup.

7.  PMiWARE Software (for franchisees that manage Associations):  presently, $0.70 cents per Unit

• Due Date:  Payable monthly; due on the 1st of each calendar month via EFT.

8.  PMiSTR Software (for franchisees that manage Short-Term Rentals):  presently, a one-time set-up fee of $3,000 (for EPMC franchisees, the set-up fee is generally $250 per Key); and (i) a monthly software user fee that is the greater of a $500 flat fee or $7.00 per month, per Key; and (ii) a monthly fee of 2% of the collected gross booking and guest fees, due and payable to the vendor on the first day of each month

• Due Date:  Payable to vendor at time of set-up; thereafter, monthly; due on the 1st day of each calendar month via EFT.

9.  PMiPrograms:  presently, a monthly fee of $80, plus $1.00 per Door or Key managed

• Due Date:  Payable monthly; due on the 1st of each calendar month via EFT.

10.  Audit Fee:  if Brokerage or Gross Revenue is understated by 5% or more, you pay the costs of audit, a charge of 50% of the understated amount, plus the Royalties and fees (plus interest) that would have been owed on the understated amount

• Due Date:  On demand.

11.  Transfer Fee:  $10,000

• Due Date:  Payable immediately at time of transfer.

12.  Franchise Renewal:  $1

• Due Date:  Payable upon Effective Date of Renewal Franchise Agreement.

• The Renewal Term is ten years.

13.  Late Fees, Non-Sufficient Funds Fees, or Interest on Late Payments:  presently, $50 per each day payment is late, plus highest applicable legal rate for open account business credit, or if there is no maximum, not less than the rate of 1.5% per month. Property Management Inc. will pass on any non-sufficient fund fees for payments from you to it, that are charged to it.

• Due Date:  Due on receipt of invoice.

14.  Insurance:  an annual premium of approximately $750-$3,000

• Due Date:  As incurred.

• Property Management Inc. has the right to acquire insurance on your behalf if you fail to do so and charge you an administrative fee and late fees.

15.  Fees on Default and Indemnity:  all costs associated

• Due Date:  On demand.

16.  Extraordinary Training Cost:  the then-current fee, which is presently a minimum of $400 to $600 per day, plus travel reimbursement

• Due Date:  10 days before visit.

• Only if you require or request Extraordinary Training.

17.  Annual Summit Fee:  the then-current fee, which is presently $350-$650 per attendee

• Due Date:  At time of registration.

18.  Trust Account Reconciliation Fee:  presently, $5 per Door

• Due Date:  As incurred.

19.  Compliance Fee:  presently, $25 per day if you are out of compliance with Real Property Management Inc.’s quality measures in the Franchise Agreement

• Due Date:  As incurred.