Considering a HouseMaster Franchise? Don’t Overlook These 30 Important Franchise Fees

If you are considering a HouseMaster franchise, don’t get blindsided by these 30 important franchise fees (from the initial franchise fee, to the royalty fee, to 28 other fees found in Items 5 and 6 of HouseMaster’s 2019 FDD).

1.  Initial Franchise Fee:  $42,500

• You will pay an initial fee of $42,500 for the right to operate your franchise.

• You will be granted certain marketing rights to an area known as a “Designated Geographic Marketing Area” or “DGMA.” The Designated Geographic Marketing Area is made up of contiguous zip codes consisting of up to approximately 75,000 owner-occupied homes. The number of owner-occupied homes is determined by the most recent census figures available and as may be updated from time to time from certain third-party demographic providers.

• The initial fee must be paid in a lump sum when you sign the Franchise Agreement.

• HouseMaster offers a 15% discount on the initial franchise fee to veterans who qualify for its veterans discount program.

• HouseMaster offers a 20% discount on the initial fee to existing franchisees buying an additional franchise.

• For new franchisees who were already in the inspection business, HouseMaster currently offers a $1,000 discount for each year as an independent inspector, up to a total discount of $15,000 for those with 15 years of experience or more.

• If HouseMaster determines during the initial training program or within 15 days of the completion of the training that you have not exhibited the aptitude, abilities, or personal characteristics to successfully operate the Franchised Business, HouseMaster may terminate your Franchise Agreement and refund to you the initial franchise fee you paid less $9,000 to cover a portion of the reasonable expenses incurred by HouseMaster for your training and in initially granting the franchise to you.

2.  Initial Training Program:  included in initial franchise fee

• The cost of the Initial Training Program, training materials, and the licensing of certain HouseMaster proprietary computer software plus the cost of NIBI Classroom Technical Training are included in the initial franchise fee.

• Additional training is available through the NIBI Online Institute, including an 11 module introductory home inspection course and continuing education courses. There is no additional charge for additional persons to attend NIBI Classroom Training; however special classroom or conference seminars and certain courses taken through the NIBI Online Institute may require payment of a fee.

• HouseMaster also provides you with a sample of materials for use in the operation of your franchise (available for sale from approved suppliers).

3.  Annual Conference Registration Fee:  up to $1,000 per attendee

• The registration fees for your first year’s attendance at the annual conference are provided as part of the initial franchise fee, as long as you attend. This registration fee shall only cover one person. Additional attendees and guests must pay the full registration fee. The registration fee varies each year and can be up to $1,000 per attendee.

• You are required to attend one annual conference or regional meeting at least once every other year. HouseMaster is not obligated to hold the conference, in which case you do not pay.

4.  Additional Package of Products or Services:  up to $1,500

• HouseMaster currently offers an additional package of products or services valued up to $1,500 for new franchisees who sign within a specific time frame after attending Discovery Day. These programs may be discontinued or changed at any time.

5.  Deposit Fee:  $10,000

• HouseMaster may offer to some prospective franchisees the right to reserve a particular DGMA for a possible franchise purchase for a limited designated period of time in exchange for a non-refundable deposit of $10,000.

• If the prospective franchisee signs a Franchise Agreement within the time period designated in the Deposit Remittance Form, the $10,000 payment is applied toward the initial franchise fee due upon the signing of the Franchise Agreement.

• If the prospective franchisee does not sign a Franchise Agreement within the time period designated in the Deposit Remittance Form, the prospective franchisee no longer has a reservation on the territory designated in the form and HouseMaster retains the $10,000 non-refundable fee.

6.  Royalty Fee:  7 ½% of first $125,000 in Gross Sales per year, 7% on $125,001 to $250,000, 6½% on $250,001 to $500,000, 6% on $500,001 to $1,000,000, 5½% on $1,000,001 to $1,500,000, and 5% on Gross Sales over $1,500,000. You must pay a minimum monthly royalty fee for each DGMA.

• Due Date:  10th day of the month for Gross Sales for the previous calendar month.

• HouseMaster requires payment by electronic transfer of funds.

• Gross Sales includes the total dollar volume of inspections and related services and any other fees received by you as a result of the operation of your business. Does not include sales tax or customer refunds, rebates, or discounts.

7.  Marketing Contribution:  2½% of first $125,000 in Gross Sales per year, 2¼% on $125,001-$250,000, and 2% over $250,000

• Due Date:  Same as Royalty Fee.

• Gross Sales definition same as Royalty Fee.

8.  Technology Fee:  currently, $75/month subject to increase upon 60 days’ notice

• Due Date:  Same as Royalty Fee.

9.  Late Payment Fee:  $10 per day

• Due Date:  On late payments for each day payment is delinquent.

10.  Transfer Fee:  $10,000

• Due Date:  Before closing on transfer.

• Payable by you or the transferee if and when you sell or transfer your franchise. No fee is due if you transfer your franchise to a new corporation controlled by you.

11.  Annual Conference/Regional Meeting Registration Fee:  up to $1,000. The 2018 registration fee was $575 for the first person and $245 for each additional person for early registration; otherwise $850 per person.

• Due Date:  30 days before date of Conference or monthly.

• During your first year, the Registration Fee for one attendee is included in your franchise fee as long as you attend. Additional attendees and guests must pay the full registration fee. If you do not attend the conference your first year, you have to pay the full registration fee (not the early registration fee).

• Thereafter, this fee is payable even if you or your manager do not attend the conference. You are required to attend one annual conference or regional meeting at least once every other year. HouseMaster is not obligated to hold the conference, in which case you do not pay.

12.  Audit:  cost of audit

• Due Date:  When billed.

• Payable only if audit is performed due to your failure to report, if audit shows an under-reporting of 3% of Gross Sales or more, or if audit shows your failure to follow territory boundary restrictions on conducting inspections.

13.  Successor Agreement Fee:  $2,500 per DGMA; plus an additional $500 if you sign a Successor Franchise Agreement after the expiration of your original Franchise Agreement, if HouseMaster permits you to sign after the expiration

• Due Date:  Upon execution of Successor Franchise Agreement.

• Payable only if you meet eligibility for signing the Successor Franchise Agreement and execute the Successor Franchise Agreement.

14.  Reimbursement for Insurance:  cost of insurance, plus HouseMaster’s expenses

• Due Date:  When billed.

• Payable only if HouseMaster pays your premium when you fail to do so.

15.  Enforcement and Collection Costs:  undetermined

• Due Date:  Upon demand.

• Payable only if (i) HouseMaster incurs legal costs in enforcing the Franchise Agreement or defending a claim and prevails in any action, or (ii) HouseMaster incurs expenses due to your failure to make timely payments, submit reports when due, or otherwise comply with the Franchise Agreement.

16.  Indemnification:  loss, liability, damages, and costs incurred by HouseMaster

• Due Date:  When claim brought against HouseMaster.

• You must reimburse Housemaster for any liability and costs incurred by it by reason of your ownership or operation of the business.

17.  Internet Training Fee (Distance Learning Program):  currently, up to $50 per module (approximately 11 modules for initial training), or up to $500 for all modules

• Due Date:  Upon registration for this optional program.

• Payable if you or your employees train via the Internet in lieu of classroom training.

18.  Software License Fee (for Home Inspection Report Writing and Scheduling):  up to $250 per month, subject to increase upon 60 days’ notice

• Due Date:  Monthly, starting on the Business State Date.

• Payable to HouseMaster’s affiliate, Home Technology Services.

19.  Cross Territory Fine:  $5,000 per occurrence, plus 50% of revenue generated from such infringing activity

• Due Date:  Upon demand.

• Payable if you conduct an inspection in an Excluded Territory or if you market your Franchised Business in another franchisee’s DGMA.

• Fine is in addition to HouseMaster’s right to terminate for breach.

20.  Insurance Fine:  the greater of $5,000 or the cost of extended reported period insurance, plus legal fees

• Due Date:  Upon demand.

• Payable if you fail to purchase the required extended reported period insurance within 30 days of expiration or termination of the Franchise Agreement.

21.  Post-Termination Fine:  $1,000 per occurrence

• Due Date:  Upon demand.

• Payable if you fail to take down the HouseMaster name from relevant social media accounts, online directories, or otherwise use the HouseMaster names or marks after termination.

22.  NIBI Training Materials Fee:  the cost of training materials, up to $350, plus shipping for each additional trainee

• Due Date:  Before training.

• Payable if you want to send more than one person to NIBI Technical Training.

23.  Liquidated Damages:  30% of your average annual Gross Sales based on the preceding 3 years

• Due Date:  Upon demand.

• Payable if you improperly disclose proprietary information or breach or otherwise not abide by the covenants not to compete in the Franchise Agreement.

24.  Fine for Violation of Covenants Not To Compete:  the greater of $25,000 or 20% of your average annual Gross Sales over the preceding 3 years

• Due Date:  Upon demand.

• Payable if you fail to abide by the covenants not to compete after termination or expiration of the Franchise Agreement.

25.  Deferred Training Fee:  $52,500, plus the cost of NIBI technical training materials (for all employees attending)

• Due Date:  Upon demand.

• Payable only if you fail to abide by covenants not to compete in the Franchise Agreement by continuing to operate a building inspection business after termination or expiration of the franchise.

26.  Customer Refund:  inspection fee paid by customer

• Due Date:  Upon demand.

• Payable if you do not resolve a customer service complaint, the customer contacts HouseMaster, and HouseMaster determines a request for refund of inspection fee is reasonable, and it pays a refund to the customer to resolve the complaint.

27.  Reimbursement of Investigation Fees:  fee HouseMaster pays to investigator or secret shopper

• Due Date:  Upon demand.

• Payable if HouseMaster investigator or secret shopper confirms violation of the Franchise Agreement.

28.  Fines for Failure to Comply with HouseMaster Method:  amount published in the Operations Manual; currently, $250 per occurrence

• Due Date:  Upon demand.

• Payable if you fail to adhere to the HouseMaster Method as specified in the Operations Manual.

29.  Reimbursement for Taxes Paid:  undetermined

• Due Date:  Upon demand.

• Payable if HouseMaster is required to pay taxes (other than income) on account of payments you make to it.

30.  NIBI – Licensing Compliance Costs (if needed):  between $0 to $15,000

• Due Date:  At time Franchise Agreement is signed or as otherwise determined by agreement between you and NIBI or other approved training entity.

• Payable to NIBI or other approved training entity, if needed to meet your state’s licensing laws and you chose to purchase such services.