Considering a Metal Supermarkets Franchise? Don’t Overlook These 24 Important Franchise Fees

If you are considering a Metal Supermarkets franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of Metal Supermarkets’ 2020 FDD).

1.  Application Fee:  $5,000

• You must pay Metal Supermarkets an application fee of $5,000 when you sign the Franchise Application (“Application Fee”). The Application Fee is fully refundable, without interest, provided that you have not signed a Franchise Agreement with Metal Supermarkets.

2.  Initial Franchise Fee:  $39,500

• The standard initial franchise fee is $39,500 which is payable in full at the time you sign the Franchise Agreement. Metal Supermarkets will credit your Application Fee against the initial franchise fee.

• Metal Supermarkets participates in the International Franchise Association VetFran Program (the “Vet Fran Program”), which provides a discount on initial franchise fees to veterans of the U.S. Armed Forces who otherwise meet the requirements of the program.

• For qualified veterans participating in the Vet Fran Program, Metal Supermarkets will reduce the amount of the initial franchise fee by $5,000 for the first Franchise Agreement you enter into with Metal Supermarkets.

• The initial franchise fee is not refundable under any circumstances, including your failure to obtain financing, your failure to successfully complete training, or your failure to lease or purchase the site for the Store within the required time period.

3.  Development Fee:  $39,500 for the first Franchise Agreement you are obligated to enter into under the Development Agreement, $25,000 for the second Franchise Agreement you are obligated to enter into under the Development Agreement, and $15,000 for the third and each additional Franchise Agreement you are obligated to enter into under the Development Agreement

• If you are going to be a Developer, then you will sign a Development Agreement and pay Metal Supermarkets a nonrefundable development fee (“Development Fee”). The Development Fee is calculated as follows: $39,500 for the first Franchise Agreement you are obligated to enter into under the Development Agreement, $25,000 for the second Franchise Agreement you are obligated to enter into under the Development Agreement, and $15,000 for the third and each additional Franchise Agreement you are obligated to enter into under the Development Agreement.

• If you (and your affiliates) are in full compliance with the Development Agreement, each Franchise Agreement you enter into with Metal Supermarkets, and all other contracts with Metal Supermarkets (and its affiliates), then the Development Fee that is paid under the Development Agreement will be in lieu of any initial franchise fees that are due to Metal Supermarkets under the Franchise Agreements entered into in connection with the Development Agreement.

• The Development Fee will be due in a lump sum at the time you sign the Development Agreement.

4.  Initial Advertising Deposit:  $15,000

• You must deposit $15,000 with Metal Supermarkets upon signing the Franchise Agreement, which is the minimum amount you are required to spend on approved advertising during the first 12 months of the operation of your Store.

• The funds must be spent on approved advertising, and Metal Supermarkets can periodically revise and specify the expenditures that constitute approved advertising.

• Metal Supermarkets will draw from your advertising deposit for advertising expenditures it makes on your behalf and otherwise adjust the balance of that deposit accordingly. Funds from the advertising deposit will also be released to you to reimburse you for the approved advertising expenditures you make during the first 12 months of the operation of your Store.

• The initial advertising deposit is not refundable.

5.  Initial Telephone and Facsimile Number Charges:  not to exceed $3,000

• Metal Supermarkets will obtain, in its name, the telephone and facsimile numbers and email addresses for use in the operation of your Store before the opening of your Store. You must purchase, lease, and/or license a telephone system which Metal Supermarkets may specify and pay the initial cost/installation.

• Metal Supermarkets estimates that the cost for the telephone system and installation charges will not exceed $3,000. This cost is not refundable.

6.  Royalty Fee:  on monthly Gross Sales up to $96,409, a royalty fee of 6% of such Gross Sales; on Gross Sales from $96,410 to $153,950, a royalty fee of 4% of such Gross Sales; and on Gross Sales from $153,951 or more, a royalty fee of 2% of such Gross Sales; all subject to annual CPI adjustments and the minimum annual royalty requirement

• Due Date:  Payable by electronic fund transfer on or before the 20th day of each month on Gross Sales for the prior full or partial month.

• If you are operating a newly-opened Store, you pay a reduced royalty fee for the first 12 months of operation equal to the greater of: i) 25% of the regular royalty rate or $100 per month for the first six months; ii) 50% of the regular royalty rate or $350 per month for the 7th through 9th months of operation; and iii) 75% of the regular royalty rate or $650 per month for the 10th through 12th months of operation.

7.  Brand Fund Contribution:  currently, 1.0% of Gross Sales, subject to an annual maximum contribution of $14,016 and subject to annual CPI adjustments

• Due Date:  Payable by electronic fund transfer on or before the 20th day of each month on Gross Sales for the prior month.

• Metal Supermarkets has the right to increase up to a maximum of 2.5% of Gross Sales with increasing maximums and reduced rates for additional stores under common ownership.

8.  Advertising Expenditures:  after the initial year, the greater of $10,000 or 1% of Gross Sales each year

• Due Date:  As expended.

• Includes amounts spent for advertising, media, and materials. All expenditures must be approved by Metal Supermarkets.

• This is in addition to the Brand Fund Contribution.

9.  Email Address Fee:  currently, $75 per year per address

• Due Date:  By January 31 of each year.

• You must pay this fee for each email address Metal Supermarkets assigns to your Store.

10.  Successor Franchise Fee:  $10,000

• Due Date:  At expiration of agreement, 50% of the successor franchise fee ($5,000) is payable when you apply for a successor franchise. If you sign all of the necessary paperwork at least 90 days before expiration of the Franchise Agreement, the balance (of $5,000) is waived. Otherwise, it is payable upon signing the successor Franchise Agreement.

• You must pay Metal Supermarkets this fee if it grants you a successor franchise upon the expiration of your Franchise Agreement.

11.  Late Fees; Interest on Late Payments:  Late Fee of $100 for any late payment or for insufficient funds. Interest at 16% per annum (not to exceed legal maximum).

• Due Date:  Upon demand.

• This interest charge and late fee applies to any money you owe Metal Supermarkets or any of its affiliates after the due date.

12.  Hosting Fees for Each Store:  $463 per month if annual Gross Sales are less than $1,000,000; $533 per month if annual Gross Sales are between $1,000,000 and $1,999,999; or $614 per month if annual Gross Sales are $2,000,000 or higher. In addition, you must pay a fee of $3 per month for each gigabyte (or portion of a gigabyte) of data storage used at any time during the month in excess of three gigabytes. These fees are subject to annual changes of up to 5% or the CPI adjustment, whichever is greater.

• Due Date:  On or before the 20th day of each month for hosting services rendered during the month.

• You must pay Metal Supermarkets these amounts to receive hosted software services under the Hosting Support and Software Agreement.

13.  Audit:  cost of audit, plus an administrative fee of $3,500

• Due Date:  Upon demand.

• If (i) you fail to submit the periodic reports as required under the Franchise Agreement, (ii) you fail to maintain and provide Metal Supermarkets with access to your books and records (whether in hard copy or electronic form) as required under the Franchise Agreement, (iii) an audit reveals an understatement of Gross Sales for any month in a twelve consecutive month period of more than 2%, or (iv) you fail to produce all of your books and records as required by Metal Supermarkets or its authorized agents within 10 days after Metal Supermarkets requests them, you must pay the entire cost of the audit (including the cost of travel, lodging, meals, and wages of auditors), plus an administrative fee of $3,500 to cover Metal Supermarkets’ administrative expenses.

14.  Transfer Fees:  a transfer approval fee of $2,500, a transferee training fee of $5,000, and a transfer closing fee of $10,500

• Due Date:  $2,500 is due upon your request for Metal Supermarkets’ approval (and is nonrefundable), $5,000 is due before training begins, and $10,500 is due before closing of the transaction.

• You must pay Metal Supermarkets a transfer fee. If you have purchased a franchise with a discounted initial franchise fee, the amount of the discount must be paid as an additional transfer fee under certain circumstances.

15.  Annual Conference Fee:  currently, $85.69 per month. If you fail to attend the annual conference, you must also pay a $2,820 fee to cover Metal Supermarkets’ costs in communicating information to you that was presented at the conference.

• Due Date:  Same as royalty fee. If you fail to attend the annual conference, you must pay the $2,820 fee 30 days after the end of the conference.

• You must pay Metal Supermarkets a monthly fee to cover a portion of the cost of Metal Supermarkets’ annual conference.

16.  Special Assistance:  varies

• Due Date:  As incurred.

• At your request, Metal Supermarkets may provide special assistance to you.

17.  Insurance:  varies

• Due Date:  As incurred.

• If you do not obtain the required insurance coverage for your Store, Metal Supermarkets may obtain coverage at your expense.

18.  Premises Repair or Maintenance:  varies

• Due Date:  As incurred.

• If you do not maintain the condition of your Store, Metal Supermarkets may perform the repair or maintenance at your expense.

19.  Attorneys’ Fees and Other Costs:  varies

• Due Date:  As incurred.

• This fee is payable if you do not comply with the Franchise Agreement or if Metal Supermarkets is joined in a lawsuit based upon your operation of a Store.

20.  Relocation Fee:  $1,040, plus Metal Supermarkets’ out-of-pocket costs

• Due Date:  As incurred.

• You may not relocate the Store without Metal Supermarkets’ prior written consent. If Metal Supermarkets approves a relocation of the Store, you must pay this fee.

21.  Indemnification:  varies

• Due Date:  As incurred.

• You must reimburse Metal Supermarkets if it is held liable for claims arising from your operation of a Store.

22.  Additional Personnel for Initial Training Program:  $1,062 for each additional individual to be trained

• Due Date:  Before training begins.

• Metal Supermarkets will train, at its expense, up to three individuals. If you want to send additional personnel to the initial training program, the training fee will be $1,047 for each individual to be trained.

23.  Additional Training:  will vary based upon courses taken

• Due Date:  As incurred.

• Metal Supermarkets will charge per diem fees for instructors’ time and materials as it determines.

24.  VoIP Services Agreement Charges:  one-time porting cost of $5 per phone number, plus equipment costs. Also, monthly costs of $19.95 (for voice per user phone and fax lines) and $1.75 for standard DID, and phone rentals ranging from $3 to $6 per month. Administrative processing fee of $3 per month.

• Due Date:  On or before the 20th day of each month for equipment used and services rendered during the month.

• You must pay Metal Supermarkets this fee to receive hosted software services under the VoIP Services Agreement.

• These amounts may be increased from time to time to account for charges from third-party VoIP services.