Are there any exceptions to the transfer fee charged by Cinch I.T. when selling my franchise?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
| TYPE OF FEE1 | AMOUNT | DUE DATE | REMARKS |
|---|---|---|---|
| to client | must pay us for our time and any compensation (i.e., replacement product) given to clients. | ||
| Audits | Cost of audit plus interest on underpayment | As incurred | Payable only if audit shows understatement is willful or if 2% or more of gross sales for a two month period. |
| Interest | Interest on overdue payment | As incurred | Interest rate will be 1.5% per month or if the maximum interest rate permitted by state law is less, then interest will be charged at the lesser allowed rate. Interest begins from the date payment was due. |
| Late Fee | $100 per occurrence plus interest | On demand, but only if you are delinquent in your payments to us or otherwise violate an obligation under the Franchise Agreement | Payable the day after payment or other event (Ex: a required report) is due, in addition to the interest. |
| Transfer, Assignment | $10,000 | Time of transfer | Payable if you sell your franchise. No fee charged if you transfer franchise to a corporation or other entity you control. |
| Transfer Fee – Development Agreement | $5,000 for each unopened Franchise; $10,000 for each open and operating Franchised Business. | Time of transfer | Payable if Multi-Unit Developer sells its franchise. No fee charged if you transfer franchise to a corporation or other entity you control. |
| Multi-Unit Extension Fee – Development Agreement | $5,000 per extension | As incurred | Payable if Multi-Unit Developer desires to extend a Development Period. |
| Renewal | $5,000 | Time of renewal | New franchise agreement, which may |
Source: Item 6 — OTHER FEES (FDD pages 14–20)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, a transfer fee is generally required when a franchisee sells their franchise. This fee is set at $10,000, payable at the time of the transfer. However, there is a notable exception to this rule.
The FDD specifies that Cinch I.T. will not charge a transfer fee if the franchise is transferred to a corporation or other entity that the franchisee controls. This provision can be particularly beneficial for franchisees looking to restructure their business for tax or liability purposes without incurring additional costs.
For Multi-Unit Developers, the transfer fee structure differs slightly. It is $5,000 for each unopened franchise and $10,000 for each open and operating franchised business. Similar to individual franchises, this fee is waived if the transfer is to an entity controlled by the Multi-Unit Developer. This exception encourages internal restructuring without penalizing the franchisee with extra fees.