Under a Burger King Development Agreement, what is the prepayment amount required for each restaurant a developer commits to develop?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
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Development Agreements*.*
As described in Item 1 of this disclosure document, we occasionally grant Development Agreements (Exhibit M1). If you sign a Development Agreement, you must prepay $50,000 for each Restaurant you commit to develop under the Development Agreement. These amounts will be credited towards the initial franchise fees payable by you as you develop Restaurants until exhausted. These prepaid initial franchise fees are due upon signing the Development Agreement.
For any Restaurant opened after these prepaid initial franchise fees are exhausted, you must pay an applicable initial franchise fee to us based on your FSS Development Grade. To determine your FSS Development Grade, we evaluate your operational performance using a system known as the "Franchise Success System" ("FSS"), under which we assign a letter grade of "A", "B", "D", or "F". The "FSS
Development Grade" is the average of all of your FSS grades, as we determine, received during the 12 month period preceding our issuance of the BK # for a Restaurant. This FSS Development Grade is also used for setting the royalty rate and advertising contribution (see Item 6) payable under the Franchise Agreements for each Restaurant developed. In determining your FSS Development Grade, if you have yet to receive your first FSS letter grade at the time of our determination, then you will be deemed to have most recently received a single FSS letter grade of "B" until such time as you have received an official actual FSS letter grade. In determining any FSS grade for these purposes, we may consider the performance of the BURGER KING® restaurants owned and operated by you and your affiliates, by any other franchisee owned by any of your owners, or by any other franchisee owned by any "Managing Owner"
Source: Item 5 — INITIAL FEES (FDD pages 28–32)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, if a franchisee signs a Development Agreement, they must prepay $50,000 for each restaurant they commit to develop under the agreement. This prepayment is credited towards the initial franchise fees as the franchisee develops the restaurants until the prepaid amount is exhausted. The prepayment is due upon signing the Development Agreement.
For Burger King restaurants opened after the prepaid initial franchise fees are exhausted, the franchisee must pay an applicable initial franchise fee based on their FSS Development Grade. This grade is determined by evaluating the franchisee's operational performance using the Franchise Success System (FSS), which assigns a letter grade of A, B, D, or F. The FSS Development Grade is the average of all FSS grades received during the 12-month period preceding the issuance of the BK # for a restaurant.
The FSS Development Grade also determines the royalty rate and advertising contribution payable under the Franchise Agreements for each restaurant developed. If a franchisee has not yet received their first FSS letter grade at the time of determination, they will be deemed to have most recently received a single FSS letter grade of B until they receive an official actual FSS letter grade. Burger King may consider the performance of Burger King restaurants owned and operated by the franchisee and their affiliates, by any other franchisee owned by any of their owners, or by any other franchisee owned by any Managing Owner or Operating Partner under any franchise agreement entered into by the franchisee or their affiliate when determining the FSS grade.