Gong Cha Franchise Costs, Fees & Owner Salary (2023)

Initial Franchise Fee ($35,000 to $40,000)

• This fee is payable when the Franchise Agreement is signed. The fee is for the grant of the franchise and for initial services provided by the franchisor.

Royalty (5% to 6% of Gross Sales)

• Franchisees are required to pay a weekly royalty fee based on a percentage of their Gross Sales. This fee compensates the franchisor for ongoing services and the right to use the franchisor's trademarks and system.

Advertising (Up to 4% of Gross Revenue)

• Franchisees must contribute to the System Ad Fund, which is used for system-wide advertising and promotion. The contribution rate is up to 2% of the Gross Revenue.
• Additionally, franchisees are required to spend on local advertising and promotion, which will be used to satisfy the Cooperative Ad Fund if one is instituted in the franchisee's trading area.
• The Cooperative Ad Fund contribution, termed as "Regional Marketing Fees", will not exceed a certain percentage of the franchisee’s Net Sales, unless the members of such Cooperative Ad Fund vote to exceed the maximum amount.
• Any Regional Marketing Fees paid by the franchisee will be credited against the franchisee’s local advertising expenditure requirement.

Grand Opening Advertising ($2,000)

• In addition to the regular advertising obligation, franchisees are required to spend a minimum of $2,000 for grand opening advertising and promotional programs in conjunction with the store's initial grand opening.

For potential franchisees, Gong Cha offers two distinct franchising avenues:

• Master Franchise Business: For visionaries looking to scale, this opportunity allows entrepreneurs to obtain rights to grant subfranchises within a specific territory, facilitating the establishment and operation of multiple Gong Cha outlets. The investment for this model is projected to span between $188,200 and $684,500.
• Affiliate Owned Gong Cha Store: This model is tailored for those who wish to establish and operate a Gong Cha store through an affiliate. The investment for this venture is estimated to range from $163,700 to $576,300.

For a comprehensive breakdown of the costs associated with each franchising model, the subsequent table provide a detailed insight.

Gong Cha provides its franchisees with a robust training program that covers various aspects crucial to running the store:

• Initial Training: Gong Cha offers an initial training program for franchisees. This program is mandatory for the Designated Principal, the General Manager, and up to one additional person, with a total of three individuals attending. The duration of this training is approximately two to three weeks, depending on the role of the individual attending.
• Location of Training: All training programs are conducted at locations designated by Gong Cha. This could be at Gong Cha's headquarters or other specified locations.
• Ongoing and Refresher Training: They provide ongoing training as they deem appropriate. Additionally, they may require franchisees or their Designated Principal and General Manager to attend refresher courses, seminars, and other training programs from time to time.
• Training Costs: While Gong Cha bears the cost of all training instruction and required materials, franchisees are responsible for other expenses related to training.  If Gong Cha conducts any additional training, they reserve the right to charge franchisees a per diem fee for such training.

Franchisees will be granted the right to operate a Master Franchise Business within a specific Authorized Territory. This Authorized Territory is described in the Key Terms of the Master Franchise Agreement.

However, it's important to note that the Authorized Territory does not include certain locations like airports, sports arenas, hospitals, schools, college campuses, corporate campuses, health clubs, military bases, casinos, convention centers, theme parks, and other similar types of locations that have a restricted trade area, termed as "Non-Traditional Locations."

While franchisees have conditional protection within their Authorized Territory, there are certain situations where this protection can cease. For instance, if the franchisee breaches specific clauses of the agreement, such as those related to subfranchising, use of the trade name, fees and payments, operation of the business, or purchases from the franchisor, their territorial protection might be affected.

Franchisees have the responsibility to manage, direct, and control their Restaurant.If a franchisee or their Principal Owner does not intend to oversee the Restaurant full-time, they must appoint an individual, referred to as the "Designated Manager," to supervise the Restaurant on a full-time basis.

This Designated Manager must meet all of Gong Cha's qualifications. If there's a change in the Designated Manager, a new one must be appointed immediately and must complete all required training within a specified timeframe.

In conclusion, while Gong Cha provides some flexibility in its management structure, they emphasize the importance of active management and supervision of the franchised business.