Is the Initial Franchise Fee for an Aw franchise refundable if the agreement is signed?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
current or past employee of ours, our affiliate or one of our franchisees who was so employed
for a minimum of one year, you must pay us an Initial Franchise Fee of Fifteen Thousand Dollars ($15,000.00) in cash in full upon the signing of this Agreement.
In recognition of the expenses we incur in furnishing assistance and services to you and of our lost opportunity to negotiate with others for this franchise, you agree that we will have fully earned the Initial Franchise Fee and that it becomes non-refundable upon signing this Agreement.
- 10.2 Royalty Fee. You agree to pay us a weekly royalty fee. You agree to pay five percent (5%) of the Gross Revenue (as defined below) of the Papa Ray's Pizza Restaurant. The royalty fee will be payable on Wednesday of each week for the period covering the previous Monday through Sunday via electronic transfer as described in Paragraph 10.7 below. The royalty fee is not refundable, in whole or in part, under any circumstances.
- 10.3 National Marketing Fund Contribution.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the initial franchise fee is generally non-refundable once the franchise agreement is signed. The standard initial franchise fee is $30,000, with $15,000 due upon signing the agreement and the remaining $15,000 due within five days of written site approval. Aw considers the initial franchise fee fully earned and non-refundable upon signing, recognizing the expenses and lost opportunities associated with granting the franchise.
However, there is an exception for franchisees in Illinois. The Illinois Attorney General requires Aw to defer all initial franchise fees until Aw has completed all initial obligations to the franchisee and the franchisee has commenced business. This deferral is due to Aw's financial condition. This modification means that in Illinois, the franchisee does not pay the initial fee upfront, and the question of refundability is less relevant since the fee is only paid after Aw has fulfilled its initial obligations.
For prospective franchisees outside of Illinois, it is crucial to understand that the initial franchise fee is non-refundable once the agreement is signed. This is a common practice in franchising, as the fee compensates the franchisor for the initial costs and efforts in setting up the franchise. Franchisees should carefully evaluate the franchise opportunity and their own capabilities before signing the agreement to avoid losing the initial fee. Franchisees in Illinois benefit from a deferred payment structure, providing some protection until Aw fulfills its obligations.