Detailed Information on Urban Air Adventure Park’s Initial Franchise Fee, Royalty Fee + 30 Other Fees (Items 5 and 6, 2022 FDD)
1. Initial Franchise Fee: $100,000
- When you sign a Franchise Agreement, you will pay Urban Air a $100,000 initial franchise fee. Except for the differences described below, the initial franchise fee is uniform for all franchisees.
- Urban Air offers a 10% discount off the initial franchise fee and the Development Fee for active-duty United States military and United States veterans that were honorably discharged. The Franchised Business must be operated under a business entity, and the active-duty personnel or veteran participant must maintain at least a 51% ownership interest in such entity throughout the initial term of the Franchise Agreement.
2. Development Fee: $100,000 to $260,000
- If Urban Air awards you multi-development rights, you must sign Urban Air’s Development Agreement and pay Urban Air an area development fee (the “Development Fee”), pursuant to the below schedule:
- 1 Park: $100,000
- 2 Parks: $85,000 each ($185,000 total)
- 3 Parks: $75,000 each ($260,000 total)
- The Development Fee the Developer must pay under the Development Agreement (a) includes the initial franchise fee payable by you for the franchise agreements to be developed, (b) will be due in a lump sum payment upon the signing of the Development Agreement, and (c) is fully earned and non-refundable in consideration of administrative and other expenses Urban Air incurs in entering into the Development Agreement, and for Urban Air’s lost or deferred opportunities to enter into the Development Agreement with others. The Area Development Fee is uniform for all Developers.
3. Purchase and Installation Agreement: deposit of 35% of the purchase price for the Attractions package, including installation, tax, insurance, and shipping costs; balance due upon shipment and delivery of the Attractions
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- In connection with the signing of the Purchase and Installation Agreement for the Attractions and related products and services you will purchase for the development and operation of your Adventure Park, you will pay to UA Attractions a deposit based upon the Attractions you purchase (35% of the purchase price for the Attractions package, including installation, tax, insurance, and shipping costs) and pay the remaining balance due under the Purchase and Installation Agreement upon shipment and delivery of the Attractions.
4. Grand Opening: $30,000 to $50,000
- You must spend between $30,000 and $50,000 in connection with your grand opening of the Franchised Business. Urban Air will consult with you in planning your grand opening, and a portion of your grand opening obligation may be paid to Urban Air, which it will then submit to its media partner no later than six weeks before your scheduled grand opening or once the grand opening media plan is submitted to you.
5. Royalty Fee: 7% of monthly Gross Sales
- Due Date: Monthly on the 15th of the month beginning on the established “Opening Date” (the date on which your Adventure Park opens for business to the public).
6. National Advertising Fund (“NAF”) Contribution: up to 5% of monthly Gross Sales; currently, 0% of Gross Sales
- Due Date: Monthly on the 15th of the month beginning on the established Opening Date.
- Currently, there is no National Advertising Fund (“NAF”), but Urban Air may establish the NAF on 30 days’ notice.
- The total contribution between NAF Contribution, Local Marketing Expenditure, and Advertising Cooperative shall not exceed 6% of Gross Sales.
7. Local Marketing Expenditure: up to 6% of monthly Gross Sales; currently, 5% of Gross Sales
- Due Date: Monthly upon invoice.
- Urban Air may modify the Local Marketing Expenditure periodically by providing you at least 30 days’ notice.
8. Advertising Cooperative (if established): amount determined by majority vote of cooperative members
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- Due Date: As incurred.
- Contributions to the Advertising Cooperative will be credited toward your Local Marketing Expenditure.
9. Grand Opening Advertising Amount: between $30,000 and $50,000
- Payable to the supplier providing the services, which may be Urban Air.
10. Training: reasonable fee (currently, $500 per day), plus reimbursement of Urban Air’s actual costs
- Due Date: Upon invoice.
- Payable to Urban Air.
11. Compliance Review Fee: actual cost of program, including cost of food, beverage, or merchandise purchased as part of the mystery shop or audit
- Due Date: Upon invoice.
- Payable if Urban Air implements a mystery shop, audit, customer satisfaction, or similar program.
12. POS License: initial set-up fee of $3,000, plus monthly subscription fee of $1,600-$1,800
- Due Date: Monthly upon invoice.
- Urban Air reserves the right to collect the fees payable to the approved supplier of POS services that Urban Air designates and pays such collected fees to the approved supplier directly.
13. Dashboard Access License Fee: $10 per month per license
- Due Date: Monthly upon invoice.
- This fee is payable to Urban Air and may be increased by Microsoft from time-to-time, which is a pass-through fee and does not include any markup or rebate.
14. Music Provider: varies depending on programming selected and number of licenses required at your Adventure Park (currently, $600 to $1,800 annually)
- Due Date: Monthly upon invoice.
- Urban Air collects this license fee on behalf of Urban Air’s designated music provider and pays such collected license fees to the music provider directly.
15. Online Training: $500 annually
- Due Date: Annually.
- Urban Air collects this fee on behalf of the licensor of the online training software and pays such collected fees directly to the licensor.
16. Supplier Testing Fee: reimbursement of Urban Air’s costs incurred in product testing and evaluating suppliers
- Due Date: Upon invoice.
- Payable only if you request to purchase products from an alternative supplier or request to use an alternate product.
17. Renewal Fee: 50% of Urban Air’s then-current initial franchise fee, plus reimbursement of Urban Air’s legal and professional expenses and its other costs incurred in connection with the renewal
- Due Date: Upon invoice.
- Payable only if you exercise your successor term option and satisfy conditions for a successor term.
18. Relocation Fee: 25% of Urban Air’s then-current initial franchise fee
- Due Date: Upon invoice.
- Payable prior to relocation only if you request and Urban Air approves your relocation.
19. Transfer Fee: 1) 50% of Urban Air’s then-current initial franchise fee if controlling interest (over 50%) is transferred to a new approved franchisee; 2) 25% of Urban Air’s then-current initial franchise fee if controlling interest is transferred to an approved existing franchisee, plus reimbursement of Urban Air’s actual legal and professional expenses and its other costs incurred in connection with the transfer; or 3) $3,500 but only if 20% or less of the total outstanding units in the Franchised Business are being transferred to an approved Owner and limited to one time per rolling 12-month period. Otherwise, such transfers are subject to the fee in #2 above.
- Due Date: Upon invoice.
- Payable before transfer of your Franchised Business if you request and Urban Air consents to transfer.
20. Resale Program Fee: greater of 4% of the purchase price paid for your Franchised Business (in any form, including cash, credit, debt, or stock) and the then-current initial franchise fee (currently, $100,000)
- Due Date: Prior to closing.
- Payable only if you elect to participate in Urban Air’s Resale Program in connection with the sale of your Franchised Business to an approved transferee of the Franchise Agreement.
21. Interest: 18% per year or maximum lawful rate
- Due Date: Upon demand.
- Interest is charged when any Royalty Fee or other fee or payment due to Urban Air is not paid when due or an audit reveals underpayment based on inaccurate Gross Sales.
- The maximum interest rate allowed by law in California is 10% annually.
22. Nonsufficient Funds Fee: $100 per occurrence, not to exceed maximum allowed by applicable law
- Due Date: Upon demand.
- Payable only if there are insufficient funds in the account designated by you for ACH debit to satisfy fees and amounts owed to Urban Air under the Franchise Agreement when due.
23. Audit Costs: reasonable cost of audit
- Due Date: Upon invoice.
- Payable if the audit is made necessary by your failure to provide reports or supporting records as required, or provide those reports, records, or information on a timely basis, or if an understatement of Gross Sales for the period of any audit is determined to be greater than 2%.
24. Indemnification: varies depending upon claim and resolution of claim
- Due Date: Upon demand.
25. Liquidated Damages: the greater of (1) $500,000 and (2) the average monthly Royalty Fee paid by you in the 12-month period preceding termination of the Franchise Agreement multiplied by 36
- Due Date: Upon demand.
26. Public Offering or Private Placement of Your Securities: reimbursement of Urban Air’s actual costs and expenses incurred in having its legal and professional counsel review offering materials
- Due Date: Upon demand.
- Payable only if you offer your securities in a public or private offering.
27. Call Center Fee: varies; Urban Air will charge you the pro rata share of the cost of operating, administering, and upgrading the call center, which includes certain fees that Urban Air collects and pays to its Designated Suppliers on your behalf. Currently, the base fee is $350-$400 per month per Adventure Park.
- Due Date: Monthly on the 15th of the month following performance or sale beginning on the established Opening Date.
- Payable to Urban Air.
28. Technology Fee: 0.25% of Gross Sales
- Due Date: Monthly.
- Payable if Urban Air implements a fee for providing basic troubleshooting support to franchisees for certain technology system components used in the operation of the Adventure Park.
29. Membership Program Fee: 2.5% of monthly Gross Sales attributable to membership fees received by Urban Air for membership agreements purchased for access to and use of your Franchised Business, plus your pro rata share of costs incurred in connection with operating the Program
- Due Date: Monthly.
- Payable to Urban Air.
30. Payment Processing Fee: varies depending upon the volume of payments made by credit card at your Adventure Park
- Due Date: Monthly.
- Payable to Urban Air.
31. Conference Fee: $500 per attendee
- Due Date: Upon invoice.
- Urban Air requires that you attend its annual conference. If you cannot attend and Urban Air excuses your absence, you must send your Designated Manager or general manager in your place. If you or your representative do not attend, you must pay Urban Air a conference materials fee of $1,000 and Urban Air will provide you with relevant training materials from the Urban Air annual conference.
32. Project Management Fee: (i) one-time fee of 3% of the total project cost, and (ii) continuing fee of 3% of Gross Sales for the length of time Urban Air guarantees your lease obligations
- Due Date: Upon invoice.
- Only payable if you participate in Urban Air’s optional Corporate-Seeded Development Program. The Project Management Fee is in addition to the initial franchise fee for the applicable franchise agreement and a non-refundable $250,000 earnest money deposit.
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