Considering a Hounds Town USA Franchise? Don’t Overlook These 31 Important Franchise Fees

If you are considering a Hounds Town USA franchise, don’t get blindsided by these 31 important franchise fees (from the initial franchise fee, to the royalty fee, to 29 other fees found in Items 5 and 6 of Hounds Town USA’s 2019 FDD).

1.  Initial Franchise Fee:  $45,000 to $120,000

• In addition to the Area Developer Franchise described below, Hounds Town USA offers three different franchise packages depending on the number of Hounds Town USA Businesses you wish to purchase:

• Initial Franchise Fee for Single Franchise:  $45,000
• Initial Franchise Fee for Multi-3 Franchise (up to 3):  $90,000
• Initial Franchise Fee for Multi-5 Franchise (up to 5):  $120,000

• If you purchase a Multi-3 or Multi-5 Franchise, you will sign the Multi-Franchise Addendum. Under the Multi-Franchise Addendum, there is no development territory or development schedule to open additional Hounds Town USA Businesses.

• To open additional Hounds Town USA Businesses under a Multi-3 or Multi-5 Franchise, you will be required to sign the then-current Hounds Town USA Franchise Agreement, but you will not be required to pay an Initial Franchise Fee (all other fees will apply).

• The Initial Franchise Fee is uniform, payable when you sign your Franchise Agreement, and is deemed fully earned by Hounds Town USA once paid and is non-refundable, even if you fail to open any Hounds Town USA Businesses.

2.  Area Development Agreement:  $22,500 multiplied by the number of Hounds Town USA Businesses to be developed under the Area Development Agreement

• If you choose to enter into an Area Development Agreement to open six or more Hounds Town USA Businesses, you must pay Hounds Town USA a development fee (“Development Fee”) when you sign your Area Development Agreement.

• The Development Fee is paid in place of the Initial Franchise Fees for the Hounds Town USA Businesses to be opened under the Area Development Agreement. The Development Fee is equal to $22,500 multiplied by the number of Hounds Town USA Businesses to be developed under the Area Development Agreement.

• Under the Area Development Agreement, you must develop a minimum of six Hounds Town USA Businesses.

• The Development Fee is deemed fully earned by Hounds Town USA once paid and is non-refundable, even if you fail to open any Hounds Town USA Businesses.

• To open additional Hounds Town USA Businesses under the Area Development Agreement, you will be required to sign the then-current Hounds Town USA Franchise Agreement, but you will not be required to pay an Initial Franchise Fee (all other fees will apply).

3.  Launch Fee:  $2,500 to $12,500

• In addition to the Initial Franchise Fee or Development Fee, you must pay Hounds Town USA a “Launch Fee” as listed below:

• Launch Fee for 1st Hounds Town USA Being Developed:  $12,500
• Launch Fee for 2nd and Each Additional Hounds Town USA Being Developed:  $2,500

• The Launch Fee offsets Hounds Town USA’s costs in supporting your efforts to open the Hounds Town USA Business.

4.  Grand Opening Marketing Package:  $7,500

• You are required to purchase a “Grand Opening Marketing Package” from Hounds Town USA for $7,500 when you sign each Franchise Agreement. This package includes 3 months’ worth of folders, brochures, business cards, envelopes, t-shirts, report cards, logo decals, banners, Hounds Town bandanas for dogs, plus 3-4 Hounds Town branded retail items such as Frisbees, coffee mugs, and dog toys.

• Additionally, this fee covers a professional video and photography team’s costs to produce a library of location-specific content for your location that you and Hounds Town USA may use to promote your business on social media, your web site, local listings, and more.

• This payment is uniform and non-refundable.

5.  Royalty:  6% of Gross Sales

• Due Date:  Due on the 10th day of the month. If the 10th of any month is not a business day, the Royalty is due on the next business day.

6.  Brand Fund Contribution:  2% of Gross Sales

• Due Date:  Same as Royalty.

• This contribution will be used for a system-wide “Brand Fund” for Hounds Town USA’s use in promoting and building the Hounds Town USA brand.

7.  Local Advertising Requirement:  a minimum of $1,600 per month or 2.5% of Gross Sales, whichever is higher

• Due Date:  Payable after receipt of invoice.

• If you fail to meet your minimum local advertising requirement on local advertising each month, you must pay Hounds Town USA the difference between the amount you spent and the required advertising expenditure, which will be contributed to the Brand Fund.

8.  Local Advertising Management Fee:  then-current fee (currently $800 per month; may be increased up to $1,000 per month)

• Due Date:  Same as Royalty.

• You must pay Hounds Town USA a “Local Advertising Management Fee” each month to cover various marketing-related management fees for social and digital media marketing and advertising.

• Hounds Town USA reserves the right to modify and add new vendors and services. You will be responsible for any increase in fees that result from any modifications or additions.

9.  Advertising Cooperatives:  as determined by the cooperative members

• Due Date:  As determined by the cooperative members.

• Any amounts you contribute to an advertising cooperative will count toward your local advertising contributions.

10.  Unauthorized Advertising Fee:  $500 per occurrence

• Due Date:  Upon demand.

• This fee is payable to the Brand Fund if you use unauthorized advertising in violation of the terms of the Franchise Agreement.

11.  Additional Training or Assistance Fees:  then-current fee (currently $1,500 per additional person for initial training and approximately $600 per attendee per day for additional training)

• Due Date:  Payable in advance of the training or assistance.

• Hounds Town USA provides initial training at no charge for up to two people, provided they attend the same initial training program. Hounds Town USA may charge you for training additional persons, newly-hired personnel, refresher training courses, advanced training courses, and additional or special assistance or training you need or request.

12.  Additional Opening Assistance:  $500 per day, plus travel and lodging expenses

• Due Date:  On demand.

• If you desire additional opening assistance, Hounds Town USA may charge $500 per day plus all travel and lodging expenses incurred by its staff.

13.  Technology Fee:  $150 per month

• Due Date:  Same as Royalty.

• The “Technology Fee” covers the cost of technologies used in the operation of your Hounds Town USA Business including local listing management, a learning management system, and review response management. Hounds Town USA reserves the right to upgrade, modify, and add new software.

• You will be responsible for any increase in fees that result from any upgrades, modifications, or additional software or technology.

14.  Convention Fee:  then-current fee (currently estimated to be $500 per person)

• Due Date:  90 days before convention.

• This fee will be payable to Hounds Town USA to help defray the cost of your attendance at any annual convention that Hounds Town USA chooses to hold. This fee is due regardless of whether or not you attend Hounds Town USA’s annual convention in any given year.

15.  Supplier and Product Evaluation Fee:  costs of inspection (estimated to be approximately $100 to $500)

• Due Date:  As incurred.

• Payable if Hounds Town USA inspects a new product, service, or proposed supplier nominated by you.

16.  Replacement of Franchise Operations Manual:  $500

• Due Date:  On demand.

• Payable if your copy of the Franchise Operations Manual is lost, stolen, destroyed, or significantly damaged.

17.  Payment Service Fee:  up to 4% of total charge

• Due Date:  As incurred.

• If payment is made to Hounds Town USA or its affiliates by credit card for any fee required, Hounds Town USA may charge a service charge of up to 4% of the total charge.

18.  Late Payment Fee:  $100 per occurrence, plus the lesser of the daily equivalent of 12% per year simple interest or the highest rate allowed by law

• Due Date:  As incurred.

• Payable if any payment due to Hounds Town USA or its affiliates is not made by the due date. Interest accrues from the original due date until payment is received in full.

19.  Insufficient Funds Fee:  the greater of $100 per occurrence, or the highest amount allowed by law

• Due Date:  As incurred.

• Payable if any check or electronic payment is not successful due to insufficient funds, stop payment, or any similar event.

20.  Failure to Submit Required Report Fee:  $100 per occurrence and $100 per week

• Due Date:  Your bank account will be debited for failure to submit any requested report within five days of request.

• Payable if you fail to submit any required report or financial statement when due.

• Fines collected are paid to the Brand Fund or Hounds Town USA.

• You will continue to incur this fee until you submit the required report.

21.  Audit Expenses:  cost of audit and inspection, any understated amounts, and any related accounting and legal expenses

• Due Date:  15 days after billing.

• You will be required to pay this if an audit reveals that you understated weekly Gross Sales by more than 2% or you fail to submit required reports.

22.  Indemnification:  will vary under circumstances

• Due Date:  As incurred.

• You must indemnify and reimburse Hounds Town USA for any expenses or losses that it or its representatives incur related in any way to your Hounds Town USA Business or Franchise.

23.  Management Fee:  $750 per day, plus costs and expenses

• Due Date:  As incurred.

• Payable if Hounds Town USA or its affiliate manages the Hounds Town USA Business because you are in breach of the Franchise Agreement.

24.  Professional Fees and Expenses:  will vary under circumstances

• Due Date:  As incurred.

• You must reimburse Hounds Town USA for any legal or accounting fees that it incurs as a result of any breach or termination of your Franchise Agreement. You must reimburse Hounds Town USA if it is required to incur any expenses in enforcing its rights against you under the Franchise Agreement or Area Development Agreement, or payable for any fees it incurs for any transfer that is not completed.

25.  Insurance:  reimbursement of Hounds Town USA’s costs, plus a $2,500 administration charge

• Due Date:  On demand.

• If you fail to obtain insurance, Hounds Town USA may obtain insurance for you, and you must reimburse it for the cost of insurance obtained plus $2,500 for an administrative cost of obtaining the insurance.

26.  Relocation Fee:  Hounds Town USA’s costs

• Due Date:  Upon relocation.

• You must reimburse Hounds Town USA for its reasonable expenses if it permits you to relocate your Hounds Town USA Business. Hounds Town USA will provide you with copies of its invoices for its expenses from any third-party providers upon request.

27.  Transfer Fee:  25% of the then-current Initial Franchise Fee

• Due Date:  $1,000 non-refundable deposit at time of transfer application submittal and the remaining balance of fee at time of the approved transfer.

• Payable in connection with the transfer of your Hounds Town USA Business, a transfer of ownership of your legal entity or the Franchise Agreement.

28.  Successor Franchise Fee:  25% of the then-current Initial Franchise Fee

• Due Date:  At the time you sign the new Franchise Agreement.

• Payable if you qualify to renew your Franchise Agreement and choose to enter into a successor Franchise Agreement.

29.  Liquidated Damages:  will vary under the circumstances

• Due Date:  Within 15 days after termination of the Franchise Agreement.

• Due only if Hounds Town USA terminates the Franchise Agreement before the end of the term because of your material breach, or you terminate the Franchise Agreement without legal cause.

30.  Broker Fees: Hounds Town USA’s actual cost of the brokerage commissions, finder’s fees, or similar charges

• Due Date:  As incurred.

• If you transfer your Hounds Town USA Business to a third party or purchaser, you must reimburse all of Hounds Town USA’s actual costs for commissions, finder’s fees, and similar charges.

31.  Area Developer Extension Fee:  $2,000 per extension

• Due Date:  As incurred.

• Subject to Hounds Town USA’s approval, Area Developers may obtain an extension of the development period to sign a particular Franchise Agreement. Each extension shall be for an additional 90-day period commencing upon the expiration of the applicable development period, including any previous extensions thereof.