If you are considering a Koala Insulation franchise, don’t get blindsided by these 26 important franchise fees (from the initial franchise fee, to the royalty fee, to 24 other fees found in Items 5 and 6 of Koala Insulation’s 2020 FDD).

1.  Initial Franchise Fee:  $20,000 to $49,500

• The initial franchise fee is $49,500 for a baseline population of 200,000. You may purchase additional population for a cost of $0.25 per person (the “Initial Franchise Fee”).

• You may purchase additional Territories at the time of the purchase of your initial Territory by signing additional Franchise Agreements and paying Koala the following discounted Initial Franchise Fees:

• Second Territory (baseline population of 200,000):  $40,000
• Third Territory (baseline population of 200,000):  $35,000
• Fourth Territory (baseline population of 200,000):  $30,000
• Fifth Territory (baseline population of 200,000):  $25,000
• Sixth and Each Subsequent Territory (baseline population of 200,000):  $20,000

• You must pay the Initial Franchise Fee in full at the time you sign the Franchise Agreement.

• If Koala concludes that the Operating Principal or Manager is unable to complete any phase of its initial training program to its satisfaction, it may terminate the Franchise Agreement, in which case it will refund the Initial Franchise Fee (subject to your execution of a release), less $5,000. Otherwise, the Initial Franchise Fee is deemed fully earned upon payment and is not refundable under any circumstances.

• Koala offers a veteran’s discount to honorably discharged veterans of the United States armed forces and their spouses. Koala will discount the Initial Franchise Fee for the First Territory by 10% for those veterans and/or their spouses who have been honorably discharged by the military.

2.  Royalty Fee:  6.5% of Gross Sales during the first 6 months of operations. Beginning at month 7 of operations, the greater of 6.5% or the required Minimum Royalty; 5% of Gross Sales over $1,000,000 annually for the remainder of the calendar year; 4.5% of Gross Sales over $2,000,000 annually for the remainder of the calendar year; 3.5% of Gross Sales over $3,000,000 annually for the remainder of the calendar year

• Due Date:  Reported weekly on Monday (no later than noon eastern time) and payable weekly, following the close of each reporting week and paid via an electronic funds transfer.

• Weekly sales reports must include Gross Sales and other information specified in the Manual.

• Koala will debit your account for 150% of your last payment if you fail to submit your sales report on time. This amount will be adjusted upon receipt of the required report.

3.  Opening Advertising (Initial Six Months):  minimum of $2,500 per month for the month prior to opening and five months after opening

• Due Date:  As incurred.

• Payable to third-party suppliers or Koala.

4.  Local Marketing (Ongoing):  the greater of $2,000 or 5% of Gross Sales per month, plus advertising agency management fees

• Due Date:  As incurred.

• Payable to third-party suppliers or to Koala for payment directly to National Account vendors where required.

• All advertising must be approved by Koala prior to publications or use.

5.  Brand Fund Contribution:  currently 1% of Gross Sales. Maximum of 2% of Gross Sales.

• Due Date:  If paid to Koala, same as Royalty Fee.

• Payable to Koala.

6.  Technology Fee:  $80 per week

• Due Date:  Paid to Koala, same as Royalty Fee.

• Payable to Koala.

7.  Computer, Software Expenses:  varies

• Due Date:  As incurred.

• Payable to third-party suppliers.

8.  Supplier Approval/Testing Costs:  costs and expenses associated with approving an unapproved product or supplier

• Due Date:  When incurred.

• If you request that Koala test or consider for approval an unapproved product or service or evaluate an unapproved supplier, you must pay any out of pocket costs Koala incurs in researching, acquiring, testing, and considering for approval the product, service, or supplier.

• You will owe these amounts regardless of whether or not Koala approves the supplier or product.

9.  Interest Charge:  1.5% per month from due date, or the maximum allowed by law

• Due Date:  If paid to Koala, same as Royalty Fee.

• If you fail to pay Koala any amount when due, Koala may charge you interest on the unpaid amount until the amount is received.

10.  Late Fee:  $50 per day or portion thereof for each payment or report not received when due

• Due Date:  If paid to Koala, same as Royalty Fee.

• Payable to Koala.

11.  Transfer Fee:  greater of 20% of then-current Franchise Fee or $10,000

• Due Date:  Before the closing of the transfer.

• Payable to Koala.

12.  Renewal Fee:  greater of 25% of the Franchise Fee or $5,000 per Territory

• Due Date:  Before signing the new, then-current Franchise Agreement.

• Payable to Koala.

13.  Insurance Procurement:  amount paid by Koala to secure insurance to fulfill your insurance obligations

• Due Date:  As incurred.

• You must reimburse Koala for the cost plus 10% plus interest for any amounts Koala pays on your behalf due to your failure to meet the insurance obligations as defined in your Franchise Agreement.

• This remedy is cumulative to all other remedies.

14.  Costs and Attorneys’ Fees:  will vary under circumstances

• Due Date:  As incurred.

• Only if you are in default under the Franchise Agreement, in which case Koala will require you to reimburse it for the expenses it incurs (including reasonable attorneys’ fees) as a result of your default and to enforce and terminate the Agreement.

15.  Indemnity:  will vary under circumstances

• Due Date:  As incurred.

• You must indemnify Koala, and reimburse it for its costs (including its attorneys’ fees and costs) and advance these expenses to Koala upon demand if it is sued or held liable in any action having anything to do with your Franchise.

16.  Audit Costs:  cost of the audit plus related expenses, provided that the costs of the audit are only due if an irregularity of greater than 5% is discovered in any reported amount, or if reports are not submitted as required

• Due Date:  As incurred.

• Koala has the right under the Agreement to examine certain records including, without limitation, your financials, bank statements, and tax returns. If an examination of these records reveals a discrepancy of more than 5%, the full amount of the audit’s actual costs will be charged in addition to any unpaid amounts discovered and other remedies as permitted under the Agreement.

17.  Failure to Comply with Operational Standards:  reasonable charge (currently, a $100 per diem charge per violation)

• Due Date:  Upon demand.

• Only due if you fail to comply with certain operational standards and specifications as specified in the Manuals and after a cure period of 10 days.

18.  Inspection Fee:  Koala’s reasonable expenses

• Due Date:  Upon demand.

• Koala requires you to reimburse its reasonable expenses for any inspection, including reinspections that Koala may undertake to ensure that deficiencies are corrected.

• Additionally, if you fail to correct the deficiencies within a reasonable time, Koala may (but need not) correct the deficiencies and will charge you for its actual expenses in taking such actions.

19.  Post-Termination and Post-Expiration Expense:  will vary under the circumstances

• Due Date:  Immediately upon the end of the Term.

• You will incur certain costs necessary to cancel fictitious name registrations, remove branding from any Koala Rigs or Franchise Location if you opted to lease one, and any other cost necessary to de-identify and disassociate with the System and Marks.

20.  Annual Conference Fee:  a reasonable fee (currently, $200 per person), which may not be increased to more than Koala’s actual cost at any time during the initial term of the Agreement

• Due Date:  Upon registration for conference, or 60 days before conference, whichever is earlier.

• Attendance by at least Operating Principal or Manager and Salesperson is mandatory.

• This fee is to cover the costs of providing meeting space and food for attendance during the annual conference. It does not cover your cost of travel to and from the conference, room and board, and other out-of-pocket expenses you may incur.

• Only one conference fee may be charged a year.

• If Koala holds a conference, you are required to attend.

21.  Initial Training:  no fee is charged for initial training

22.  Additional Initial Training:  additional trainees or replacement trainees may attend any future training courses based on available space and scheduling at no additional cost. If no courses are scheduled, or no space is available, the current Training Fee may be assessed. This fee is currently $5,000 per trainee. For training at your location, Koala’s then-current daily fees per trainer will be charged. Currently, Koala’s fee is $200 per trainer per day, plus travel, per diem, and lodging expenses as required.

• Due Date:  Upon demand.

• Koala provides initial training for up to three individuals (typically the Operating Principal, Manager, and Salesperson) at no charge.

• Koala requires any new Operating Principal or replacement Manager or Salesperson to complete Koala’s training program, and Koala may charge a fee for such training.

• If no courses are scheduled or space in such courses is unavailable, Koala may also charge a fee for training for any individuals that it trains beyond the two individuals that it trains at no charge.

23.  Refresher Training/On-site Training:  all expenses incurred by your representatives in attending refresher training are your responsibility; for additional on-site training, you must pay Koala its then-current per diem charges and out-of-pocket expenses

• Due Date:  Upon demand.

• Koala requires that your Operating Principal, Manager, and other employees attend and successfully complete refresher training programs or seminars to be conducted at such location as Koala designates.

24.  Additional Opening Assistance:  Koala’s service fee as specified in the Manuals (which is currently $200 per day); plus Koala’s expenses and costs

• Due Date:  Time of assistance.

• If you request assistance or training, in addition to the pre-opening and opening training that Koala provides, Koala charges you for this additional assistance.

25.  Additional Advertising and Promotional Materials:  $250 to $500

• Due Date:  As billed.

• If Koala provides you with advertising and promotional materials to use in your Franchise, Koala charges a reasonable amount for these materials.

26.  Liquidated Damages:  average of monthly Royalties and Brand Fund Contributions for the past 12 months (or shorter period of time the Franchise has been open, if less) multiplied by 36 months (or remaining months in term), discounted to present value

• Due Date:  Upon demand.

• Only if the Franchise Agreement is terminated by Koala due to your default, or if you terminate the Franchise Agreement in violation of its terms.