Detailed Information on Wingstop’s Initial Franchise Fee, Royalty Fee + 23 Other Fees (Items 5 and 6, 2021 FDD)
1. Development Fee: $10,000
- The Restaurant franchise program always involves two types of agreements and fees: a Development Agreement with development fees and a Franchise Agreement with franchise fees.
- The Development Agreement gives you an option to purchase a Restaurant franchise. The option becomes exercisable when you secure a suitable Restaurant site during the option period (which usually lasts 180 days).
- You pay a $10,000 development fee when you sign the Development Agreement. If you obtain development rights for additional Restaurants, you must pay a development fee equal to $10,000 times the number of additional Restaurants you commit to develop.
- You must pay the development fee in full when you sign the Development Agreement. The development fee is not refundable.
2. Franchise Fee: $20,000
- The franchise fee for each Restaurant developed under a Development Agreement currently is $20,000. You must pay the full franchise fee when you sign the Franchise Agreement for the Restaurant. The franchise fee is not refundable. (Development fees and franchise fees are separate; development fees are not credited toward franchise fees.)
- Wingstop participates in the International Franchise Association’s VetFran Program, which generally provides discounts on initial franchise fees to veterans of the U.S. Armed Forces who otherwise meet the Program’s requirements.
- First-time purchasers of franchises who are veterans of the U.S. Armed Forces are eligible to pay a reduced franchise fee of $5,000 for their first Wingstop Restaurant (representing a $15,000 discount off the standard $20,000 franchise fee).
- To qualify for the discount, the veteran must own at least a 50% interest in the franchise.
- “Veteran” means a recipient of an honorable discharge as evidenced by the U.S. Department of Defense.
- The VetFran discount does not apply to development fees.
3. Royalties: 6% of Gross Sales (However, Royalty will be 5% of Gross Sales for franchisees renewing their franchises who previously committed to obtain, and in fact bought and installed, the Wingstop system’s currently-required point-of-sale system by December 31, 2016.)
- Due Date: Payable weekly by automatic debit of your account on Tuesday of each week for Gross Sales during the week ended the prior Saturday.
- Gross Sales include all revenue from your Restaurant but exclude sales taxes, coupon credits, employee discounts, third-party delivery fees, and revenue from gift cards sold (although Gross Sales include full value of transactions where payment is made with gift cards).
4. Ad Fund: 4% of Gross Sales
- Due Date: Payable weekly; the same as royalties.
- The Ad Fund contribution rate may be increased if the franchisees owning majority of U.S. franchised Restaurants vote to require all U.S. franchisees to pay on a going-forward basis the then-applicable maximum Ad Fund contribution rate Wingstop specifies in its then-current Franchise Agreement, and the Ad Fund contribution rate it specifies in its then-current Franchise Agreement is greater than 4% (Wingstop and its affiliates do not vote on any potential increase above the amount it may unilaterally establish).
5. Ad Customization Fee: reasonable charge
- Due Date: Upon delivery of customized advertising materials.
- If Wingstop or its affiliates elect to provide you customized copies of advertising materials showing information about your Restaurant, you may be charged a reasonable customization fee. This fee is not currently charged.
6. Local Advertising and Promotional Materials: franchisees must spend 2% of their Restaurants’ quarterly Gross Sales on local advertising (directly or through an area advertising cooperative operating in their markets)
- Due Date: Upon billing by service providers.
- You must join a not-for-profit or local area advertising cooperative if one is formed in your market; you must participate in all system-wide promotions and advertising campaigns.
- If you fail to spend the required percentage of Gross Sales to advertise and promote your Restaurant locally, Wingstop may require you to pay it that amount (for deposit into a Marketing Operating Fund) at the same time you pay it royalties (by automatic debit of your bank account); Wingstop then will work with you and other franchisees in your DMA to spend those monies on marketing plans and materials to promote your Restaurant and other Wingstop Restaurants in the DMA.
7. Insurance: as provided in the Operations Manual
- Due Date: Before your Restaurant opens and before each policy renewal date.
- You must buy your insurance from a company with an A.M. Best rating of A-/VIII or better.
- If you fail to obtain required insurance, Wingstop or its designee may obtain it for you and charge you the costs.
8. National Gift Card Program Charges: approximately 10% of value of Wingstop gift cards issued/sold by third-party retailers (i.e., not by Wingstop Restaurants) for eventual redemption at Wingstop Restaurants; amount may change in future based on charges by third-party gift card program administrator
- Due Date: Cost is recovered upon issuance of gift cards.
- Third-party gift card program administrator retains this amount upon issuance/sale of gift cards by third-party retailers to cover costs of its administrative services and pays balance of amounts received to Wingstop’s affiliate, Wingstop GCM, LLC.
- When customer redeems gift card at your Restaurant, Wingstop GCM, LLC pays you 90% of the value of the transaction. However, royalties and Ad Fund contributions you pay (and your other payment obligations under the Franchise Agreement based on Gross Sales) are calculated on the full value of each gift card redemption (i.e., 100% of the sale).
- This arrangement does not apply to redemptions of gift cards issued/sold directly by Wingstop Restaurants.
- Neither Wingstop nor its affiliates receive any portion of the approximately 10% administrative charge.
9. Indemnification: unlimited (but depends on nature of claim)
- Due Date: Upon demand by Wingstop.
- You must indemnify Wingstop and its affiliates from liability for any claim based on or arising from your Restaurant’s operation or your use of the Wingstop web site or Intranet; you also must defend the claim or reimburse Wingstop’s expenses if its attorneys defend it.
10. Audit Fees: cost of audit, including auditor’s travel, meals, and lodging expenses (depends on extent of your noncompliance and cooperation with Wingstop)
- Due Date: Upon invoice.
- You pay this fee if you lack adequate records or have understated any year’s annual Gross Sales by 1% or more.
11. Non-Reporting Fee: $250
- Due Date: Debited weekly.
- Due if you do not report weekly Gross Sales.
12. Interest/Late Charges: interest on past-due obligations to Wingstop and its affiliates at the highest commercial contract interest rate the law permits
- Due Date: Due upon invoice if you pay obligations more than 5 days late.
13. Transfer Fees: $10,000
- Due Date: Payable before transfer’s effective date.
14. Renewal Fee: 25% of the sum of Wingstop’s then-current development fee and franchise fee (that currently would equal $7,500). If you renew your franchise for a 2nd 10-year renewal term (after the first 10-year renewal term ends), you must pay Wingstop 50% of the sum of its then-current development fee and franchise fee (that currently would equal $15,000).
- Due Date: Payable when you renew franchise.
- This renewal fee is due when you renew franchise for a 10-year renewal term.
15. Website Maintenance Fee: $25 initial set-up cost/up to $50 per month
16. Intranet Maintenance and Development Fee: up to $50 per month
17. Operations Manual(s)/Training Materials Replacement Charge: $12.93 for recipe guide, $1.26 for spec sheets, and $3.35 for product quality guide, plus shipping costs
- Due Date: Before replacements are sent to you.
- You will be charged only for replacement costs and shipping. These amounts may increase if costs increase.
18. Annual Convention Attendance Charge: currently, $500 per attendee
- Due Date: Upon invoice.
- This amount may increase if costs increase. You may be required to pay this charge even if you do not attend the convention.
19. Product and Service Purchases: varies depending on products and services you buy from Wingstop or its affiliates
- Due Date: As incurred.
- You will buy products, supplies, and services from designated and approved vendors whose items meet Wingstop’s standards and specifications and from other suppliers to the industry in which Restaurants operate.
20. Attorneys’ Fees and Costs: will vary under circumstances and depend on nature of your non-compliance
- Due Date: Upon invoice.
- Due when you do not comply with the Franchise Agreement.
21. Liquidated Damages
- If you continue using Wingstop’s trademarks or system after expiration or termination of your franchise, you must pay Wingstop a weekly royalty equal to 150% of the royalty you were paying beforehand.
- If you unilaterally terminate the franchise before the end of its term, and within 24 months start operating a competitive business, you must pay Wingstop a weekly fee equal to 10% of the competing operation’s revenue for what would have been the remaining franchise term.
- If you sell your Restaurant or its assets and the buyer does not sign a Franchise Agreement to continue operating the Restaurant under the Wingstop name, you must pay Wingstop the royalties you would have paid it during the remaining franchise term, discounted to present value.
- Wingstop will assume that your annual Gross Sales during the remaining franchise term would have been one-third of the Restaurant’s Gross Sales during the 36-month period before the violation occurred.
22. Supplemental Training/Assistance: up to $1,000 per trainer, plus out-of-pocket costs
- Due Date: Upon invoice.
- Due for supplemental onsite training or assistance you need or request beyond the amount provided to you at no cost.
23. Tax Reimbursement: out-of-pocket cost reimbursement
- Due Date: As incurred.
- You must reimburse Wingstop for any taxes it must pay to any state taxing authority on account of either your operation or your payments to it.
24. Relocation: $5,000
- Due Date: 5 days after Wingstop’s request.
- You must pay this fee in connection with your Restaurant’s relocation.
25. Transfer Marketing Expenditure: $2,500 to $7,500
- Due Date: 3 months after the transfer’s effective date.
- You must spend the minimum amount, determined by market, to market the Restaurant immediately following transfer.