How is the development fee calculated for an Area Development Agreement (ADA) with Chop5 Salad Kitchen?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
e uniformly imposed.
Development Fee
If you sign an ADA, you pay us a nonrefundable development fee calculated as the sum of the total initial franchise fees you pay for all Restaurants you commit to develop under the ADA. The initial franchise fee for each Restaurant and the development fee are determined in accordance with the following table:
| Restaurants Purchased | Initial Franchise Fee | Development Fee |
|---|---|---|
| 1 | $40,000 | N/A - 2 Restaurant minimum for ADA |
| 2 | $40,000 | $80,000 |
| 3 | $35,000 | $115,000 |
| 4 | $35,000 | $150,000 |
| 5 | $35,000 | $185,000 |
| 6 | $25,000 | $210,000 |
| (and all additional Restaurants) | (per Restaurant) | (plus $25,000 for each additional Restaurant) |
The development fee is deemed to satisfy the initial franchise fee associated with each Restaurant you develop under the ADA. We anticipate most area developers will purchase the right to develop between 2 and 5 Restaurants, which results in development fees ranging from $80,000 to $185,000. Development fees are uniformly imposed except as disclosed below for qualified veterans.
Veteran's Discount
Qualified veterans receive a 10% discount on the initial franchise fee or development fee, as applicable. To qualify, a person holding at least a 51% interest in the franchise must be an honorably discharged veteran of any branch of the Uni
Source: Item 5 — INITIAL FEES (FDD page 12)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, the development fee for an Area Development Agreement (ADA) is calculated as the sum of the total initial franchise fees for all restaurants the developer commits to open. This fee is nonrefundable and satisfies the initial franchise fee for each restaurant developed under the ADA.
The FDD outlines a tiered structure for the initial franchise fee and corresponding development fee based on the number of restaurants purchased under the ADA. For example, if a developer commits to opening two Chop5 Salad Kitchen restaurants, the initial franchise fee is $40,000 per restaurant, resulting in a development fee of $80,000. For three restaurants, the initial franchise fee is $35,000 each, totaling a $115,000 development fee. The document anticipates that most area developers will purchase the right to develop between 2 and 5 restaurants, leading to development fees ranging from $80,000 to $185,000.
For those committing to six or more restaurants, the initial franchise fee drops to $25,000 per restaurant. The development fee is then calculated as $210,000 plus an additional $25,000 for each restaurant beyond the initial six. The FDD also notes a potential discount for qualified veterans, who may receive a 10% reduction on either the initial franchise fee or the development fee. To qualify, a person holding at least a 51% interest in the franchise must be an honorably discharged veteran of any branch of the United States military and provide a Form DD-214.