How does the initial franchise fee for Cilantro Taco Grill (
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
4.1 Multi-Unit Operator Fee. In consideration of the rights granted under this Agreement, Multi-Unit Operator shall pay Franchisor a development fee (the "Development Fee") as outlined in Attachment 3 hereto. The Development Fee is fully earned at the time this Multi-Unit Operator Agreement is signed and is not
refundable under any circumstances. Multi-Unit Operator shall pay the full amount of the Development Fee to Franchisor upon Multi-Unit Operator's execution of this Agreement.
4.2 Application of Development Fee. The Development Fee is calculated based on the number of units Multi-Unit Operator has committed to open. If Multi-Unit Operator commits to develop between five (5) and nine (9) Restaurants, Multi-Unit Operator shall pay a Development Fee of one hundred percent (100%) of the initial franchise fee for three (3) Restaurants, plus fifty percent (50%) of the initial franchise fee for each additional Restaurant. If Multi-Unit Operator commits to develop ten (10) or more Restaurants, Multi-Unit Operator shall pay a Development Fee of one hundred percent (100%) of the initial franchise fee for five (5) Restaurants, plus fifty percent (50%) of the initial franchise fee for each additional Restaurant. Contemporaneous with the execution of this Agreement, Multi-Unit Operator shall execute the initial Franchise Agreement for the first Cilantro Taco Grill outlet to be established pursuant to the Mandatory Development Schedule. Multi-Unit Operator shall receive a corresponding credit from the Development Fee, which shall be applicable to the Initial Franchise Fee due under the initial Franchise Agreement. Upon the execution of each of additional Franchise Agreement for outlets to be developed hereunder, Multi-Unit Operator shall receive a corresponding credit from the Development Fee, which shall be applicable to the Initial Franchise Fee payable pursuant to each such additional Franchise Agreement. Upon Franchisor's approval, Multi-Unit Operator may enter into the initial Franchise Agreement or any subsequent Franchise Agreement as required under this Agreement using a newly formed entity, such as a limited liability company, corporation or partnership, for the sole purpose of entering into a Franchise Agreement and operating the Cilantro Taco Grill restaurant outlet pursuant thereto, provided that Multi-Unit Operator shall also personally sign such Franchise Agreement as a principal.
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, the initial franchise fee structure depends on whether the franchisee is a multi-unit operator. For multi-unit operators, the franchise agreement outlines a development fee structure based on the number of units the operator commits to open. This fee is fully earned upon signing the Multi-Unit Operator Agreement and is non-refundable. The development fee is calculated based on the number of restaurants the Multi-Unit Operator commits to developing.
Specifically, if a Multi-Unit Operator commits to opening between five and nine restaurants, they must pay 100% of the initial franchise fee for three restaurants, plus 50% of the initial franchise fee for each additional restaurant. If the commitment is for ten or more restaurants, the operator pays 100% of the initial franchise fee for five restaurants, plus 50% of the initial franchise fee for each additional restaurant. Contemporaneously with the execution of the agreement, the Multi-Unit Operator must execute the initial Franchise Agreement for the first Cilantro Taco Grill outlet to be established according to the Mandatory Development Schedule. The Multi-Unit Operator will receive a credit from the Development Fee applicable to the Initial Franchise Fee due under the initial Franchise Agreement.
This structure incentivizes multi-unit development by offering a discounted rate on the initial franchise fees for additional units beyond a certain threshold. It also requires a significant upfront investment through the non-refundable development fee. Prospective franchisees should carefully consider the number of units they are willing to commit to and the financial implications of the development fee structure. The FDD does not specify the exact dollar amount of the initial franchise fee, so prospective franchisees should inquire about this amount to fully understand the financial commitment required.