Taco Bell’s Initial Franchise Fee, Royalty Fee + 19 Other Fees

Detailed Information on Taco Bell’s Initial Franchise Fee, Royalty Fee + 19 Other Fees (Items 5 and 6, 2021 FDD)

1.  Initial Franchise Fee:  $25,000 to $45,000

• Taco Bell charges an initial franchise fee of $45,000 for a new Traditional Unit or Power Pumper. The initial franchise fee for a new In-Line or End-Cap is $25,000.

• The initial franchise fee is not refundable unless after receipt of payment from the franchisee, Taco Bell determines that the franchisee and the restaurant qualify for a waiver or reduction in the initial fee.

• You apply for a franchise for a specific location by registering the site on MyTacoBell, which website will be made available once you are approved by Taco Bell as eligible to become a franchisee, and paying a $10,000 deposit towards the initial franchise fee.

• After your receipt of notification that Taco Bell has approved your location and upon ground break of the Unit, the balance of the initial franchise fee is due.

2.  Real Estate and Construction Development Services:  varies

• Taco Bell’s affiliate, Yum Restaurants Services Group, LLC (“YRSG”), offers real estate and construction development services (commonly referred to as TDS, or Taco Bell Development Services), with additional services being available at an hourly rate.

• Fees paid to YRSG may be paid by check or via wire as described on the invoice and are not refundable.

3.  Grand Opening Expense:  $5,000 to be spent by you for advertising and promoting the opening of the Unit

• Due Date:  Within 6 months of opening, you must spend $5,000.

• Provided that all paid invoices or other proofs of expenditure are submitted to Taco Bell within 9 months of the opening date, Taco Bell will reimburse you for amounts not to exceed $5,000.

4.  Period Franchise Fee:  5.5% of the Unit’s Gross Sales

• Due Date:  On or before the 5th business day immediately following the accounting period in which the sales were made.

• “Gross Sales” means all payments received for sales and services of any nature excluding only sales taxes, employee meals, overrings, and refunds to customers.

5.  Period Marketing Fee:  4.25% of the Unit’s Gross Sales

• Due Date:  On or before the 5th business day immediately following the accounting period in which the sales were made.

• Used to help defray Taco Bell’s costs of advertising.

6.  Late Charges:  the lesser of 18% per annum or the highest rate permitted by New York law, plus the then-customary administrative charge

• Due Date:  As billed.

• Payable on any fees that are not paid when due.

7.  Back of House & Support Services:  $1,651 per year

• Due Date:  As billed.

• Payable to Taco Bell or an affiliate.

8.  Front of House & Support Services:  $2,093 per year

• Due Date:  As billed.

• Payable to Taco Bell or an affiliate.

9.  All Access Fee:  $1,500 per year

• Due Date:  As billed.

• Payable to Taco Bell or an affiliate.

10.  Additional Trainee Fee:  $350 per person

• Due Date:  Before beginning of training.

• The cost of the training program is included for you (if an individual) and your restaurant manager. However, Taco Bell may charge the fee set forth above for any additional trainees, and may also charge tuition for training courses that are not mandatory.

11.  Training Materials:  as established by Taco Bell

• Due Date:  As billed.

• Taco Bell may develop materials for your use for in-store training. You are not required to purchase all of the training materials from Taco Bell.

12.  Cost of Audit of Your Books:  any and all costs incurred in connection with the inspection or audit, including reasonable accounting and legal fees

• Due Date:  As billed.

• Only due if Taco Bell inspects your books and finds you have understated Gross Sales by 2% or more.

13.  Transfer Fee:  a transfer of all or a portion of your interest in any Unit is subject to a transfer fee. Minimum fees are listed below and are subject to increase for costs incurred by Taco Bell, including but not limited to outside counsel fees, in connection with reviewing and effecting the transfer:

• 3rd party (non-private equity) transfers:  1-5 units: $7,500/transfer; 6 or more units: $1,500/unit

• 3rd party transfers involving private equity:  greater of non-private equity transfer fee or $150,000

• entity restructures:  $2,500 total unless changes to the Franchise Agreement(s) are required, in which case the transfer fee shall be the 3rd party transfer fee

• Additionally, unique or complex restructures may necessitate a higher fee.

• Due Date:  Payable via a wire transfer only at least 2 days prior to the closing date of the proposed transfer.

• For non-private equity transfers, a 50% nonrefundable deposit of the appropriate transfer fee payable via a wire transfer may be required upon written notice from Taco Bell to you following Taco Bell’s initial review of the purchase and sale agreement.

• For private equity transfers, a 50% non-refundable deposit shall be payable via a wire transfer to Taco Bell with the submittal of the fully-executed purchase and sale agreement between the parties.

• Transfer of your franchise is subject to Taco Bell’s prior written approval.

14.  Reimbursement of Insurance Expense:  actual cost of insurance

• Due Date:  As billed.

• If you fail to obtain insurance as required, Taco Bell may purchase it for you and bill you for the cost.

15.  Mid-Term Upgrade:  $130,000

• Due Date:  As billed.

• Payable to 3rd party vendors.

16.  Successor Fees:  for Traditional Units, the greater of $22,500 or ½ of then-current initial franchise fee. For Power Pumpers, In-Lines, and End-Caps, the greater of $12,500 or ½ of applicable then-current initial franchise fee. Additionally, you will be required at your expense to complete an offset, scrape/rebuild, or major remodel of the Unit as a condition to obtaining a successor agreement.

• Due Date:  Upon execution of the successor agreement.

• The Franchise Agreement does not provide you with renewal rights, but Taco Bell has a Franchise Agreement Expiration Policy currently in effect, subject to modification or cancellation at any time.

17.  Extension Fee:  $750 for a 3-month extension; $2,250 for a 6-month extension, plus $1,000 for each additional month beyond 6 months

• Due Date:  Upon execution of Amendment to Franchise Agreement.

• Only applicable if Taco Bell agrees to temporarily extend the term of the Franchise Agreement to allow you additional time to complete remodel or relocation of Unit.

18.  De-identification Costs:  actual cost of de-identifying Unit

• Due Date:  As billed.

• Payable to third-party vendor, unless you fail to de-identify your Unit as required upon expiration or earlier termination of the Franchise Agreement, then Taco Bell may do it for you and bill you for the costs.

19.  Attorneys’ Fees:  prevailing party in any litigation is entitled to reasonable attorneys’ fees and costs paid by other party. Outside counsel fees may also be due in connection with review and approval of a transfer of interest.

• Due Date:  You must pay Taco Bell for attorneys’ fees, as they are accrued. In the case of a transfer, fees may be payable by you directly to outside counsel.

• Applicable to litigation proceedings under the Franchise Agreement and in certain instances to transfer of interest reviews.

20.  Liquidated Damages:  if Franchise Agreement is terminated for certain specified reasons, you must pay liquidated damages equal to the greater of 11% of Unit’s Gross Sales for last 12 months of operation or $100,000

• Due Date:  You must pay Taco Bell liquidated damages upon termination of the Franchise Agreement.

• If you enter into a Relationship Agreement with Taco Bell or into an Asset Purchase Agreement to purchase existing restaurants from Taco Bell, and you fail to use Taco Bell’s Back of House system at each restaurant that is subject to a Relationship Agreement or an Asset Purchase Agreement, for at least 24 months after the date the Back of House system was installed at each such restaurant, you will be subject to paying Taco Bell $60,000, which represents both a penalty and liquidated damages.

• Due Date:  You must pay Taco Bell liquidated damages upon failure to comply with the terms of use of the Back of House system.

21.  Development Fee (Development Agreement):  if you purchase existing Units from Taco Bell, one of its affiliates, or another franchisee and enter into a Development Agreement, and you fail to timely open required Units, you must pay Taco Bell the $45,000 initial franchise fee and periodic payments of $4,231 until the actual opening date of each new Unit or 10 years from the missed opening date, whichever first occurs

• Due Date:  $45,000 due within 5 days of scheduled opening date that is missed for new Unit. $4,231/period due within 7 days after last day of each applicable accounting period.