Item 5 - INITIAL FEES

This item details the Initial Fees associated with becoming a franchisee, including all fees you will have to pay before opening your business. The Initial Franchise Fee is meant to cover the cost incurred by the franchisor to recruit, qualify, close the franchise transaction, and train you as a franchisee.

Objective

  • Understand any fees, payments, or commitments to pay, for services or goods you will receive from the franchisor prior to opening your business. Determine if the fees are reasonable and comparable to similar franchise systems.

Important Considerations

  • What's the status of the litigation? Concluded vs. pending?
  • Are there any patterns over the past 10 years?
    • Are the fees consistent with the information disclosed in Item 7?
  • The franchise fee is usually non-refundable, which means that unless the franchise agreement states otherwise, you won't get the fee back in any circumstances. In some cases, your franchise agreement may provide a refund if you cancel the deal within a certain period after you sign the agreement.
  • How high are the territory fees, if any, compared to similar franchises?
  • Are there any franchise fee discounts available? For example, some franchisors offer discounts for military veterans.
  • Are the fees payable in a lump sum or installments?

Item 4

Item 6