Considering a CruiseOne Franchise? Don’t Overlook These 15 Important Franchise Fees

If you are considering a CruiseOne franchise, don’t get blindsided by these 15 important franchise fees (from the initial franchise fee, to the royalty fee, to 13 other fees found in Items 5 and 6 of CruiseOne’s 2016 FDD).

Unless provided otherwise, all fees stated below are paid to CruiseOne, nonrefundable, and uniformly imposed.

1.  Initial Franchise Fee:  $495 to $9,800

• When you sign your Franchise Agreement, you must pay CruiseOne the Initial Franchise Fee described below. The amount of the Initial Franchise Fee depends on whether CruiseOne designates you a level 1, 2, or 3 franchisee. Your level is designated on Schedule 3.1. of your Franchise Agreement.

• The Initial Franchise Fee and other fees you will pay CruiseOne under the Franchise Agreement are nonrefundable.

• If you are a level 1 franchisee, your Initial Franchise Fee is $9,800.

• If you are a level 2 franchisee, your Initial Franchise Fee is $3,195.

• If you are a level 3 franchisee, your Initial Franchise Fee is $495.

• If you are a level 1 franchisee who has served or is serving in any branch of the United States military and can provide satisfactory proof of service, you may qualify for a 20% discount off your Initial Franchise Fee.

• If you are a level 1 franchisee, you may qualify for a 10% discount off your Initial Franchise Fee under CruiseOne’s Diversity Fran initiative. CruiseOne respects and values not only differences related to race, gender, ethnicity, religion, disability, and sexual orientation, but also diversity of viewpoint, experience, talents, and ideas.

• CruiseOne may finance the Initial Franchise Fee for qualified level 1 franchisees. If you qualify, you must pay $3,500 toward the Initial Franchise Fee, and issue a promissory note for the balance, when you sign the Agreement. If you are an entity and not an individual, your owners must personally guaranty the Note and sign a guaranty.

• CruiseOne may periodically offer reductions or rebates off its Initial Franchise Fee. If it does, they will be based on minimum performance commitments you must make or other criteria it deems appropriate.

• CruiseOne’s determination of what level franchisee you are is based on your prior experience in the travel industry (including the amount of your commissionable departed revenues in the 12 months before you submit your franchise application):

• Level 1 franchisees need no prior experience in the cruise industry, or if they have experience, have less than $100,000 annual commissionable departed revenues (which need not be verified).

• Level 2 franchisees must have verifiable annual commissionable departed revenues of $100,000 to $199,999 and have a current CLIA or IATAN card.

• Level 3 franchisees must have verifiable annual commissionable departed revenues of $200,000 or more and have a current CLIA or IATAN card.

2.  Royalty Fee:  the Royalty Fee is a percentage of your Annual Commissionable Sales (excluding those relating to travel insurance) not exceeding $22,500 (the “Annual Royalty Fee Cap”) calculated as follows:

• i.  1.5% of Annual Commissionable Sales upon which CruiseOne receives a commission of 4.9% or less (excluding those relating to travel insurance);

• ii.  2% of Annual Commissionable Sales upon which CruiseOne receives a commission of more than 5% to 9.99% (excluding those relating to travel insurance); and

• iii.  3% of Annual Commissionable Sales upon which CruiseOne receives a commission of 10% and greater (excluding those relating to travel insurance).

• Due Date:  When CruiseOne receives payment from cruise lines and travel providers, it deducts this fee from your commission.

• You pay CruiseOne a continuing nonrefundable royalty (the “Royalty Fee”) on Annual Commissionable Sales. CruiseOne automatically deducts the Royalty Fee from payments it receives from cruise lines and travel providers as a result of your bookings.

• CruiseOne collects all commissions paid by travel and other suppliers arising from your sales and remits them to you, less any amounts you owe CruiseOne under or in connection with the Franchise Agreement (including Royalty Fees).

• CruiseOne remits these commissions in the manner and at the times provided in the Operation Standards Manual. It has the exclusive right to collect all commissions, you have no right to collect or otherwise receive commissions directly from the travel supplier or other supplier paying them.

• CruiseOne may require you to pay it any Due Amount by any of the following methods (the “Payment System”):

• by deducting an amount equal to the Due Amount from the amount of any commissions paid to CruiseOne by travel suppliers and other suppliers arising from the Franchisee’s sales;

• by charging your Designated Credit‐Card Account;

• by using a payment system using pre-authorized transfers from your operating account through the use of special checks, or electronic fund transfers, or through the use of any other payment system designated by CruiseOne; or

• CruiseOne may offset any Due Amount against any amount it may owe you under or in connection with the Franchise Agreement.

• You must create and maintain a valid credit‐card account to be used exclusively for operating the Franchised Business and paying Due Amounts to CruiseOne (the “Designated Credit‐Card Account”).

• You authorize CruiseOne to charge all Due Amounts to the Designated Credit‐Card Account. You may not use the Designated Credit‐Card Account for any purpose, other than for those purposes.

• “Annual Commissionable Sales” means the total commissionable sales price booked for that Contract Year by the travel supplier (or other travel company or supplier, including travel insurers), excluding any noncommissionable line items (including taxes or port charges).

• CruiseOne may adjust your Annual Commissionable Sales to account for passenger refunds and cancellations.

• “Contract Year” means each one‐year period ending on the anniversary of the Effective Date.

• Commissions and goods for non‐cruise services (including travel services and charter and incentive programs) are established at varying rates depending upon the product or service. CruiseOne publishes your commission rates for those goods and services, and the Royalty Fee received on those items, promptly after being notified of such rates by the supplier.

• At the end of each Contract Year, the Annual Royalty Fee Cap will be re‐established at $0 and adjusted accordingly based on your Annual Commissionable Sales during the next Contract Year of operation.

3.  Travel Insurance Royalty Fee:  3% of all Annual Commissionable Sales relating to travel insurance (the “Travel Insurance Revenues”)

• Due Date:  When CruiseOne receives payment from insurers, it deducts this fee from your commission.

• You also pay CruiseOne a royalty on travel insurance (the “Insurance Royalty Fee”) you sell. The Insurance Royalty Fee is not subject to the Annual Royalty Fee Cap, even though the Annual Commissionable Sales to which they relate are counted toward the Annual Royalty Fee Cap.

• Consequently, you must continue to pay Insurance Royalty Fees on Travel Insurance Revenues earned after the Annual Royalty Fee Cap is reached.

• CruiseOne may increase the Insurance Royalty Fee to reflect changes in its commission arrangements with insurance providers.

4.  Administrative Service Fee:  $25 to $150 monthly

• Due Date:  Beginning on the 1st day of the 4th calendar month following your training (but in no event more than 150 days after the Effective Date of your Franchise Agreement).

• You must pay CruiseOne a monthly administrative service fee (the “Service Fee”). The Service Fee is calculated based on Departed Commissionable Sales and resets on each anniversary of the Effective Date.

• The Administrative Service Fee is determined by the total Departed Commissionable Sales, which is based on departed revenue during the period beginning on your last Effective Date anniversary (or the Effective Date for the 12‐month period beginning on the Effective Date) and concluding on the current year’s Effective Date anniversary.

5.  Minimum Annual Commissionable Sales Fee (Level 2 & Level 3 Franchises Only):  if CruiseOne changes you from a Level 3 to a Level 1 franchisee, $9,305. If CruiseOne changes you from a Level 3 to a Level 2 franchisee, $2,700. If CruiseOne changes you from a Level 2 to a Level 1 franchisee, $6,605.

• Due Date:  On demand, but no later than 30 days following the end of your first Contract Year.

• If you sign your Franchise Agreement as a Level 3 franchisee and, as of the end of your first Contract Year, your Annual Commissionable Sales are less than $100,000, CruiseOne may change you from a Level 3 to a Level 1 franchisee and may require you to pay a fee equal to $9,305.

• If you sign your Franchise Agreement as a Level 3 franchisee and, as of the end of your first Contract Year, your Annual Commissionable Sales are $100,000 to $199,999, CruiseOne may change you from a Level 3 to a Level 2 franchisee and may require you to pay a fee equal to $2,700.

• If you sign your Franchise Agreement as a Level 2 franchisee and, as of the end of your first Contract Year, your Annual Commissionable Sales are less than $100,000, CruiseOne may change you from a Level 2 to a Level 1 franchisee and may require you to pay a fee equal to $6,605.

• These fees do not apply after your first Contract Year.

6.  Insufficient Funds Checks and Refused Credit Card Charge Fees:  an amount equal to (a) $29, plus (b) a fee equal to (i) the charges imposed on CruiseOne by its bank in connection with a returned check, if applicable or (ii) any chargeback to which CruiseOne is subject as a result of your customer’s failing to pay any credit card charge

• Due Date:  On demand.

• You must pay CruiseOne these amounts each time (a) your customer’s check is returned for insufficient funds, (b) your customer fails to pay any credit‐card charge, or (c) CruiseOne attempts to use the Designated Credit‐Card Account to pay itself any Overdue Amount and the credit‐card processor declines payment for any reason, including an insufficient credit line or the expiration or invalidity of the credit card.

7.  Sales Associate and Replacement Manager Training Fee:  $495 (subject to change)

• Due Date:  Before Mandatory Initial Training begins.

• Sales Associates and any replacement Manager must complete Mandatory Initial Training. This training may be provided by way of the Internet.

• You must pay for the costs and expenses associated with training, including the then‐standard training fee CruiseOne charges for Mandatory Initial Training, as well as travel, lodging, and meal expenses.

8.  Transfer Fee (for transfer to wholly‐owned entity):  $3,195

• Due Date:  Before CruiseOne consents.

• Among other conditions, you must pay CruiseOne this amount for any proposed transfer to your wholly‐owned corporation or limited liability company (including all legal and professional fees).

9.  Relocation:  $149

• Due Date:  Before CruiseOne consents.

• You may not relocate your Contact Location to a location outside the five-digit postal code of the original Contact Location without CruiseOne’s prior written consent.

• Relocation requests must be submitted in writing and accompanied by a $149 relocation fee, which is refundable if CruiseOne does not consent.

• CruiseOne may withhold its consent to a relocation request for any reason.

10.  Late Payment Charge:  $25

• Due Date:  On demand.

• Imposed if any payment you owe CruiseOne is overdue.

11.  Annual Sales Associate Fee:  $100 per year for each sales associate

• Due Date:  Beginning on the first anniversary of the Effective Date, and on each anniversary thereafter.

• You must pay CruiseOne $100 for each person other than the Franchise Owner who is hired by, or otherwise works for you, in any capacity.

• If a sales associate’s relationship with you is terminated, or if any other person who works for you ceases to do so, before the expiration of the year for which the Annual Sales Associate Fee has been paid for him or her, CruiseOne will refund the Annual Sales Associate Fee on a pro rata basis.

12.  Errors and Omissions Insurance:  $150

• Due Date:  Beginning on the first anniversary of the Effective Date, and on each anniversary thereafter.

• You must pay CruiseOne an annual fee of $150 per person. This applies for yourself, your co‐owners who work in the business (if any), your general manager, and each sales associate.

• It is subject to change based on costs to CruiseOne, changes in risks, and other factors it deems appropriate.

13.  Liquidated Damages:  see formula below

• Due Date:  Upon termination of your Franchise Agreement.

• If CruiseOne terminates your Franchise Agreement for cause, you must pay it a lump‐sum payment equal to the sum of:

• a.  the product of (i) the Service Fee in effect as of the date of termination times (ii) the lesser of (1) the number of full months remaining in the Term had it naturally expired and not been terminated or (2) 12. If the Service Fee is not yet in effect as of the date of termination, the Service Fee shall be $150 per month for the purpose of calculating this payment; plus

• b.  the total of all Royalty Fees for the following applicable period:

• i.  If, as of the date of termination, your Franchised Business has been operating for 12 months or more and there are more than 12 months remaining in the Term had it naturally expired and not been terminated, the 12 calendar months of operating your Franchised Business before your default;

• ii.  If, as of the date of termination, your Franchised Business has been operating for 12 months or more and there are less than 12 months remaining in the Term had it naturally expired and not been terminated (the number of remaining months, the “Remaining Months”), the period of months (and any portion of months) your Franchised Business has been operating before your default equal to the number of Remaining Months; or

• iii.  If, as of the date of termination, your Franchised Business has been operating for less than 12 months, the period of time your Franchised Business has been operating before the default, projected on a 12‐calendar‐month basis.

• CruiseOne may elect not to collect this payment in cases of hardship as deemed appropriate by it in its sole discretion.

14.  Indemnification:  amount of damages and expenses CruiseOne incurs

• Due Date:  On demand.

• You must indemnify CruiseOne for all damages and expenses it incurs from third‐party claims relating to your ownership or operation of the Franchised Business.

15.  Enforcement Costs:  amount of reasonable attorneys’ fees, court costs, and all expenses incurred in connection with the action or proceeding

• Due Date:  On demand.

• If any legal action or other proceeding (other than mediation conducted according to the Franchise Agreement) is instituted for the enforcement of the Franchise Agreement or to resolve any other Dispute, the successful or prevailing party or parties is entitled to recover these amounts.