If you are interested with a Plato’s Closet franchise, do not be blinded by these 16 essential franchise fees (from initial franchise fees, up to royalty fees, up to 14 other charges contained in Items 5 and 6 of 2015 FDD Plato’s Closet).
You have to pay Plato’s “Initial Cost” to cover the cost of the goods and services that give you before your Store is opened. Initial Fee includes Early Franchise Fees and start-up costs of Plato’s Closet POS system and proprietary software.
Any Initial Cost component will be explained below:
1. Initial Franchise Fee: $ 15,000 to $ 25,000
- If you open a single Store, you will need to pay a “Preliminary Franchise Fee” of $ 25,000 to the Plato’s Closet. The Early Franchise Fee is $ 15,000 if you open a second or Subsequent Shop or if you are an existing franchise holder from one of the other franchisor’s franchise concepts.
- You must sign a separate Franchise Agreement for each Store. And also, you must pay the Initial Franchise Fee for your first Store simultaneously to Plato’s Closet when you sign the Franchise Agreement. Initial Franchise Fee is non-refundable.
2. Point-of-Sale System (POS) Fee: $ 22,100 to $ 27,500
- You must use in your Store a point-of-sale system (POS System) selected by Plato’s Closet for Your Business System, and you must sign Computer Software License Agreement with Plato’s Closet for the use of its proprietary software program. (Proprietary Software).
- The initial cost of the POS System and Ownership Software will range from $ 22,100 to $ 27,500 for each Store, which includes DRS Maintenance Costs. This amount is not refundable.
- You will usually purchase a Proprietary POS and Software System immediately before you attend the second Plato’s Closet training week.
- The Franchisor, through its subsidiary Winmark Business Credit, Inc., may provide you with the POS system or other equipment necessary to operate your Business. Monthly payments and financial fees will vary based on the value of the leased equipment, the type of leased equipment, your financial health, your credit history, the type of rent, and other factors.
3. Continuing Fee: 5% of “Gross Sales.”
- Due date: On or before Wednesday every week for the previous week.
- “Gross Sales” means the total revenue you receive from the sale of goods and services, whether by cash or by check, credit card or trade, in connection with the Store, customers refunds and returns and sales or similar taxes. Gross Sales includes all transactions that were done through the Internet.
- Gross sales exclude wholesale transactions from Plato’s Closet franchise holders to other Plato franchisees who have a good reputable relationship with franchisors.
- In certain situations, other franchisees may pay a lower percentage rate for continuing fee than you. All new franchisees are required to pay the percentage stated in the disclosure document. However, franchisees with earlier Franchise Agreements may be required to pay a lower percentage rate than the stated amount or may be required to pay less at the time of their Franchise Agreement renewal.
- In the future, Plato’s Closet can alter the Continuing Fee for new franchisees and renewals except for Your Franchise Agreement explicitly grants you the right to renew your Franchise Agreement at a lower rate.
- Plato’s Closet requires you to withdraw your Continuing Fee and other fees directly from your bank account.
4. Marketing Cost: $ 1,000 per year
- Due Date: On January 1st of each year.
5. Cooperative Advertising Fee: the maximum amount is 5% of your gross sales
- Due Date: Established by the franchisor or franchisees.
- Franchisor or local Plato’s franchisee’s holder can establish advertising cooperatives in your area. Local advertising cooperatives will set the cost of cooperative advertising cost.
- If the company’s store is a member of your co-op, then the company’s store has the same voting rights as the franchise store. The company’s stores will not control the voting rights of any local cooperative.
- There are currently no companies owning Plato’s Closet stores.
6. Local Marketing Cost: the minimum amount, when combined with cooperative advertising costs, is 5% of your Gross Sales
- Due Date: Minimum amount must be issued each calendar year.
- To the extent that your annual contribution to the cooperative advertising program is less than 5% of your Gross Sales for Your Store, you will need additional advertising and marketing activities in your local geographic area.
- Your local advertising activity (personal advertising), however, will not eliminate your obligation to contribute to cooperative advertising programs.
- If you do not spend at least 5% of Gross Sales for the calendar year for cooperative or local advertising, the Plato Cabinet may require you to pay the difference between what you should spend on advertising during the calendar year and what you actually spend, with money to spend on advertising initiatives in your market the following year at the discretion of Plato’s Closet.
7. Advertising Charges: if the Plato’s Closet charges this fee, you will pay up to 2% of your Gross Sales
- Maturity Date: If the Plato’s Closet charges this fee, it will be due on or before Wednesday of each week for the previous week.
- Plato’s Closet may, with 60 days notice, increase your minimum advertising spend by up to 6% of your Bruto Store Sales. From 6% to one third (or 2% of Gross Sales) will be paid in “Advertising Cost” to Plato’s Closet for deposit in “Advertising Fund” to be managed by the franchisor. A minimum 6% ad terms balance must be used for cooperative advertising and local advertising.
8. Transfer fee: $ 10,000
- Due Date: Before the transfer is completed.
- This fee will be paid if the Franchise Agreement or most of the Store’s assets or franchisee’s controlling rights are transferred.
9. Audit Fees: costs and expenses related to the audit
- Due Date: After review or audit.
- Debt only if understatement more than 2%.
10. Renewal fee: $ 5,000
- Maturity Date: 30 days before renewal of the Franchise Agreement.
11. DRS Maintenance Fee: the fee for the current Franchise Agreement period is $ 1,000. Upon renewal, the current rate for the cost will be applied.
- Maturity Date: Fees will mature upon placement of the POS System sequence, and upon renewal of the Franchise Agreement.
- This fee is for upgrades to antivirus software and database engines that support DRS software and will be paid when you initially order your POS System and after renewing your Franchise Agreement.
12. Renovation Fee: will vary under normal circumstances
- Due Date: When it happens.
- You should modernize your Store on notice from Plato’s Closet, although you cannot ask you to do it more than once every five years. Modernization must conform to the standards Plato requested at that time for the new Plato’s Closet Store.
- The scope of modernization may range from simply repainting to fully improve the entire Store, including equipment replacement, exterior signs, sign fixtures, equipment, and POS Systems.
- Plato Cabinets can not estimate the current costs for modernization projects because the scope and level of modernization will vary based on current brand standards, Store conditions, and labor and material costs at the time.
- You may make this payment in whole or in part to third parties approved by Plato’s Closet and/or preferred vendors. Before modernizing your Store, you must submit your modernization plan to Plato’s Closet for approval.
13. Insurance: will vary under certain circumstances
- Due Date: When Plato’s Closet asks for a replacement.
- Debt to Plato’s Closet if you fail to pay insurance premiums and Plato’s Closet pays for you.
14. Interest Expense: less than 18% per annum or maximum rate permitted by law
- Due Date: When is due.
- Debt if Continuing Fee or another amount due to Plato’s Closet not paid on time.
15. Rent Payment: will vary under certain circumstances
- Due Date: When is due.
- Debt if you sign a lease agreement for equipment used in your store.
16. Lawyer Fees and Costs: will vary under normal circumstances
- Due Date: When it happens.
- Plato’s Store can recover reasonable attorneys fees and cost if you lose a dispute with them.
Okay, 16 Franchise fees above are fees that you must prepare and pay to the franchisor. Surely you can estimate the total cost you need to prepare. So, are you ready to open your first Plato’s Closet location?
*This data is taken around April 2017. Current conditions may be the same or already change.