These fees normally include: the Initial Franchise Fee, Royalty Payments, Late Payment Charges, and other fees that may be applied by the franchisor such as travel costs incurred by head office for additional training after the initial training period. The franchisor elects how these payments are to be made, either by business check or through automated debiting of your account.
Fees cannot be negotiated because they have been made uniform throughout the franchise system; to offer one person a different set of fees over another would compromise the ethics of the franchise system.
Here is the actual Payment of Fees section in the Krispy Kreme franchise agreement which has been reproduced in its whole.
Please note that Krispy Kreme has discontinued their franchising program in the United States and Canada. The sections in this agreement are for references purposes only.
Part 3, Section A: Initial Fee
Concurrently with the signing of this Agreement, you agree to pay us a nonrecurring and nonrefundable franchise fee in the amount of Twenty-Five Thousand Dollars ($25,000.00), which will be fully earned by us when paid. If you paid a Development Fee, that portion of the Development Fee attributable to this STORE, will be credited toward the Initial Fee.
Comment: This $25,000 initial “franchise” fee is a standard amount levied by many franchisors. They do not explain what this fee covers in the section. The Initial Fee is typically paid for the purchase of the right to use the franchisor’s “brand” and the advantages associated with buying a franchise system. In other words, you are paying the franchisor because of the time, money, and effort spent on developing the franchise system. The Initial Fee should be paid one-time only.
Part 3, Section B: Royalties
You agree to pay us royalties ("Royalties") in the amount of four and one-half percent (4.5%) of the gross sales ("Gross Sales") of the STORE each week by electronic funds transfer. We will periodically designate the day of the week (the "Payment Day") for the payment of Royalties. Royalties will be based on Gross Sales of the STORE for the preceding week. You agree to comply with procedures specified by us in our Manuals (defined in Subsection 4.C.), and/or perform such acts and sign and deliver such documents as may be necessary to assist in or accomplish payment by the method described in this Subsection.
On the Payment Day of each week, you agree to report to us by telephone or electronic means the true and correct Gross Sales of the STORE for the immediately preceding week ending on Sunday. You agree to give us authorization, in the form that we designate, for direct debits from the Account. Under this procedure you will authorize us to initiate debit entries and/or credit correction entries to the Account for payments of Royalties and other amounts payable under this Agreement, including, but not limited to, purchases for production equipment, doughnut mixes and other ingredients, packaging and supplies purchased from us and any interest charges due thereon.
You agree to make the funds available in the Account for withdrawal by electronic transfer no later than the due date for payment therefore. The amount actually transferred from the Account to pay Royalties will be based on the STORE's Gross Sales reported to us or determined by us from the records contained in the cash register/computer terminals of the STORE. If you have not reported Gross Sales of the STORE to us for any reporting period as required above, we will be authorized to debit the Account in an amount equal to the Royalties transferred from the Account for the last reporting period for which a report of the Gross Sales of the STORE was provided to us in an amount based on information retrieved from the cash register/computer terminals of the STORE.
If at any time we determine that you have under reported the Gross Sales of the STORE, or underpaid Royalties or other amounts due to us under this Agreement, we will be authorized to initiate immediately a debit to the Account in the appropriate amount in accordance with the foregoing procedure, including interest as provided for in this Agreement. Any overpayment will be credited to the Account through a credit effective as of the first reporting date after we and you determine that such credit is due.
