How does Alloy allocate initial franchise fees and fixed consideration under the franchise agreement?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
egional advertising group or cooperative will count toward your local marketing requirement.
FEES, REPORTING AND AUDIT RIGHTS
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- You must pay the fees described below and comply with the following provisions:
- A. Initial Franchise Fee. You must pay us an Initial Franchise Fee in the amount of set forth on the Data Sheet. The Initial Franchise Fee is a lump sum payment and is due when you sign this Agreement. The Initial Franchise Fee is earned upon receipt and, except as noted below, is nonrefundable.
- B. Royalty Fee. In addition to the Initial Franchise Fee, during the full term of this Agreement, or any Interim Period, and in consideration of the rights granted to you, you must pay to us a weekly Royalty Fee equal to 7% of Gross Sales.
- C. Brand Development Fund Fee. You must pay to us a weekly Brand Development Fund Fee in an amount equal to 2% of Gross Sales. The Brand Development Fund Fee is separate from any local marketing requirements. The Brand Development Fund Fees are not held by us in trust and will be spent in accordance with subparagraph 8.A of this Agreement.
- D. Technology Fee. You must pay to us each week a technology fee (the "Technology Fee") in an amount set forth in the Data Sheet. We will use these fees to fund new and ongoing technology initiatives, as well as technical support and database administration, internet marketing and various corporate technology services. We reserve the right to increase the Technology Fee by an amount of no more than 30% per calendar year in order to recover in part any increase in costs for such services. The monies will be administered by us. The fee will begin when the software is set up and initiated to coincide with training.
- E. Daily Noncompliance Fee. We have the right to charge you a Daily Noncompliance Fee for each day that you remain out of compliance with the Franchise Agreement or any mandatory standard or procedure. The Daily Noncompliance Fee is payable via ACH immediately upon 24 hours' notice, and may be charged until you cure any applicable default. The Daily Noncompliance Fee is in addition to, and not in lieu of, any rights we have under this Agreement (including termination for defaults as set forth in this Agreement). As of the date of this Agreement, the Daily Noncompliance Fee is $100, but that amount is subject to change at any time.
- F. Computations and Remittances. Except as otherwise stated in this Agreement, all amounts due and owing to us weekly, and will be paid through electronic funds transfer. You also submit the reports required by subparagraph 9.I of this Agreement. We reserve the right to change the due date for any or all amounts. You must certify the computation of the amounts in the manner and form we specify, and you must supply to us any supporting or supplementary materials as we reasonably require to verify the accuracy of remittances.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the initial franchise fee is a lump sum payment due when the franchise agreement is signed. This fee is considered earned upon receipt by Alloy and is generally nonrefundable, although there may be exceptions. For franchisees in South Dakota, the initial fees and payments are deferred until Alloy completes its pre-opening obligations under the franchise agreement due to the franchisor's financial condition and requirements from the South Dakota Securities Regulation Office.
In addition to the initial franchise fee, Alloy franchisees must also pay a weekly royalty fee, which is 7% of gross sales. Franchisees are also obligated to pay a weekly Brand Development Fund Fee, which is 2% of gross sales. This fund is used for advertising and related expenses to benefit franchisees, with a portion designated to offset Alloy's administrative costs. Furthermore, franchisees must pay a weekly technology fee, the amount of which is specified in the Data Sheet, to fund new and ongoing technology initiatives, technical support, database administration, internet marketing, and various corporate technology services. Alloy retains the right to increase the Technology Fee by no more than 30% per calendar year to cover increased costs for these services.
Alloy also has the right to charge a Daily Noncompliance Fee for each day a franchisee remains out of compliance with the Franchise Agreement or any mandatory standard or procedure. This fee is payable via ACH with 24 hours' notice and continues until the default is cured. This fee is in addition to any other rights Alloy has under the agreement, including termination for defaults.
Prospective franchisees should carefully review the Data Sheet within the Franchise Agreement to understand the specific amounts of the initial franchise fee and weekly technology fee applicable to their franchise. They should also be aware of the conditions under which fees may be increased or if non-compliance fees may be applied, and understand the specific regulations for franchisees in South Dakota regarding fee deferrals.