What is the condition for 360 Painting to receive initial fees from Illinois franchisees?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Sections 4.1 and 4.7 of the Franchise Agreement are modified to reflect that Franchisor must defer the payment of all initial fees payable to Franchisor until Franchisor has fulfilled all of its material preopening obligations to Franchisee and Franchisee has commenced doing business pursuant to the Franchise Agreement. The Illinois Attorney General's Office imposed this deferral requirement due to Franchisor's financial condition. Accordingly, notwithstanding anything to the contrary contained in the Franchise Agreement, Franchisee must pay Franchisor the Franchise Fee and initial technology fee payable to Franchisor at the time Franchisor has fulfilled all of its material pre-opening obligations to Franchisee and Franchisee has commenced doing business pursuant to the Franchise Agreement.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the franchisor must defer the payment of all initial fees from Illinois franchisees until it has fulfilled all of its material pre-opening obligations to the franchisee. Additionally, the franchisee must have commenced doing business pursuant to the Franchise Agreement. This deferral requirement was imposed by the Illinois Attorney General's Office due to 360 Painting's financial condition.
This means that a new 360 Painting franchisee in Illinois will not be required to pay the franchise fee and initial technology fee until 360 Painting has completed all the necessary steps to get the franchisee's business ready to open. These steps typically include site selection assistance, training, and providing the franchisee with the necessary equipment and materials. Only after these pre-opening obligations are met and the franchisee has started operating their 360 Painting business will the initial fees become due.
This arrangement offers a significant benefit to Illinois franchisees, as it reduces their upfront financial risk. They are not required to pay the initial fees until 360 Painting has demonstrated its commitment to supporting their launch and the business is actually up and running. This also provides an incentive for 360 Painting to efficiently and effectively fulfill its pre-opening obligations.
Prospective franchisees in Illinois should carefully review the Franchise Agreement to understand exactly what constitutes 360 Painting's material pre-opening obligations. They should also confirm with existing franchisees in Illinois their experiences with the pre-opening process and the timing of initial fee payments.