Considering a Gyu-Kaku Japanese BBQ Franchise? Don’t Overlook These 17 Important Franchise Fees

If you are considering a Gyu-Kaku Japanese BBQ franchise, don’t get blindsided by these 17 important franchise fees (from the initial franchise fee, to the royalty fee, to 15 other fees found in Items 5 and 6 of Gyu-Kaku Japanese BBQ’s 2019 FDD).

1.  Initial Franchise Fee:  $50,000

• You pay Gyu-Kaku a $50,000 initial franchise fee (the “Initial Franchise Fee”) when you sign your Franchise Agreement.

• Gyu-Kaku will refund 50% of your Initial Franchise Fee, less expenses that Gyu-Kaku has incurred, if: (1) you do not complete the Initial Training Program; (2) you are unable to locate an acceptable location for your Licensed Restaurant within 6 months of signing a Franchise Agreement; (3) you are unable to obtain the appropriate building permits necessary to build and open the Licensed Restaurant; or (4) you are unable to obtain the licenses and/or permits necessary to sell alcoholic beverages (beer and wine only) at your Licensed Restaurant.

2.  Development Option Fee:  $25,000 multiplied by the number of Licensed Restaurants which you must open

• When you sign Gyu-Kaku’s current form of Area Development Agreement, you must pay Gyu-Kaku an initial franchise fee of $50,000 for your first Licensed Restaurant, plus a development option fee equal to $25,000 multiplied by the number of Licensed Restaurants which you must open (excluding the first Licensed Restaurant).

• When Gyu-Kaku accepts the site for each additional Licensed Restaurant, you will sign a separate Franchise Agreement and pay Gyu-Kaku the initial franchise fee then being charged by Gyu-Kaku to new Gyu-Kaku franchisees (but not to exceed $50,000) less a credit of the development option fee of $25,000 for the right to open the additional Licensed Restaurant.

• The development option fee is fully earned by Gyu-Kaku when paid and is not refundable under any circumstance.

3.  Continuing Royalty Fee:  5% on the first $1,500,000 of Gross Sales; 4.5% on Gross Sales from $1,500,000.01 to $2,000,000

• Due Date:  The 7th day of each month.

4.  Advertising Fee:  1.5% of Gross Sales

• Due Date:  Same as Continuing Royalty Fee.

• The Advertising Fee is equal to 1.5% of your Gross Sales during the preceding month.

5.  Convention Registration Fee:  $500 per attendee

• Due Date:  On demand.

• The Convention Registration Fee may be adjusted periodically up to $700 per attendee.

6.  Late Charge:  bank fees of $50, plus interest at the rate of 1.5% or the highest rate allowed by law, whichever is less, plus all other related charges and expenses Gyu-Kaku incurs

• Due Date:  Accrues until paid.

• Payable only if your payment is late.

7.  Additional Training Courses:  as established by Gyu-Kaku. Fees will be uniform for all franchisees. You must also pay Gyu-Kaku’s costs and expenses for lodging, travel, and meals for Gyu-Kaku’s personnel.

• Due Date:  On demand.

• Payable only if you request Gyu-Kaku to provide training, or Gyu-Kaku deems that you are not operating your Licensed Restaurant in compliance with the Gyu-Kaku Operations Manual (“Manual”) and other policies.

8.  Cooperative Advertising:  as determined by each Co-op Advertising Region but not to exceed 1.5% of Gross Sales each month, unless a majority of the members of the Co-op Advertising Region votes to increase the rate

• Due Date:  As established by Gyu-Kaku.

• You must contribute to the Co-Op if Gyu-Kaku establishes a Co-op Advertising Region for the region where your franchise is located. Your contribution to the Co-op Advertising Region will be applied as a credit towards the 1% (or 0.5% if this Agreement is the second or subsequent one entered into between Franchisee and Franchisor) of Gross Sales per year which you must spend on local advertising under Section 8.1 of your Franchise Agreement.

9.  Site Review Costs:  you must reimburse Gyu-Kaku for its reasonable costs that it incurs in reviewing each proposed location after the first proposed location

• Due Date:  On demand.

• If you haven’t found a location for your Licensed Restaurant when you sign your Franchise Agreement, you must obtain Gyu-Kaku’s acceptance of the location by submitting information about the proposed location that Gyu-Kaku requires.

• Gyu-Kaku will review such information for one proposed locations at no charge; however, for the second location Gyu-Kaku reviews, and each location thereafter, you must reimburse Gyu-Kaku for all costs, including payment to consultants and agents that Gyu-Kaku retains and including a reasonable allocation of overhead and administrative expenses.

10.  Site Visits:  flat per diem charge of $50 for each of Gyu-Kaku’s personnel

• Due Date:  On demand.

• Payable when Gyu-Kaku assists you with the opening of your Licensed Restaurant, and only otherwise (i) if you request Gyu-Kaku to visit your Location or (ii) if Gyu-Kaku’s site visits to your Location indicates noncompliance with your Franchise Agreement or Gyu-Kaku’s Manual.

• Gyu-Kaku is not limited in the number or frequency of its inspections, but it will give you at least 7 days’ notice before it conducts an inspection.

11.  Transfer Fee:  $10,000

• Due Date:  Before transfer.

• Payable only if you sell your franchise. However, if the transferee is: (i) a member of your immediate family; (ii) a current franchisee in good standing of 3 or more years; or (iii) an employee of a Restaurant of 5 or more years; the transfer fee will be reduced to $2,000.

• There is no transfer fee if the transferee is a “Controlled Entity” as defined in the Franchise Agreement.

12.  Private Offering of Securities by Existing Franchisees:  greater of $5,000 or Gyu-Kaku’s reasonable costs and expenses incurred to review the proposed offer, including legal and accounting fees

• Due Date:  Before the Private Offering.

• Payable only if you offer the securities, partnership, or other ownership interests through a private offering.

• This fee is in addition to the $10,000 transfer fee.

• You may not make a public offering of securities.

13.  Audit:  cost of audit, plus interest at the highest rate allowed by law (but not to exceed 18%) on underpayment

• Due Date:  On demand.

• Payable only if audit shows an understatement of 2% or more of Gross Sales.

14.  Supplier Approvals:  all reasonably anticipated costs to review, evaluate, and monitor the proposed Supplier’s qualifications (including travel expenses)

• Due Date:  In advance of Gyu-Kaku’s review of a proposed supplier (or upon Gyu-Kaku’s request for reimbursement).

• Payable only if you ask Gyu-Kaku to approve a Supplier.

15.  Franchise Advisory Council (“FAC”) Fee:  a reasonable amount as determined by Gyu-Kaku or as determined by the FAC leadership

• Due Date:  Upon demand.

• Payable only if Gyu-Kaku establishes the FAC and then only if Gyu-Kaku or the FAC leadership requires you to pay a fee.

16.  Software Support Fee:  as determined by Gyu-Kaku

• Due Date:  Upon demand.

• Payable only if Gyu-Kaku determines, in its discretion, that it is advisable to provide you with support services regarding the Computer System, POS System, and any other required computer hardware or software.

17.  Intranet Maintenance Fee:  as determined by Gyu-Kaku

• Due Date:  30 days after notice to you.

• Upon Gyu-Kaku’s request, you must pay Gyu-Kaku a reasonable amount to be applied toward the cost of maintaining the Intranet.

• Gyu-Kaku will establish the amount to be contributed by January 31 of each calendar year of the term of your Franchise Agreement and the fee will be payable within 30 days.