Is the All States M.E.D. Development Fee consideration for the Franchise Agreement?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
As consideration for the rights granted in this Agreement, you must pay us the Initial Franchise Fee stated in the Franchise Agreement at the time you sign this Agreement for the first territory to be developed under this Agreement and one-half of the Initial Franchise Fee for each subsequent Location to be developed under this Agreement.
The Development Fee is consideration for this Agreement and not consideration for any Franchise Agreement, is fully earned by us upon execution of this Agreement and is non-refundable. The part of the Initial Franchise Fee that is included in the Development Fee is credited against the Initial Franchise Fee payable upon the signing of each individual Franchise Agreement. The balance of the Initial Franchise Fee for the first Location must be paid at the time of execution of this Agreement, together with the execution by you of the Franchise Agreement for the first Location. The balance of the Initial Franchise Fee for each subsequent Location is due upon entering into a Franchise Agreement for each additional Location.
Source: Item 23 — RECEIPTS (FDD pages 44–174)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, the Development Fee is consideration for the Area Development Agreement, not the Franchise Agreement. The Development Fee compensates All States M.E.D. for granting the developer the rights to develop and operate multiple franchised locations within a specified territory. This fee is earned upon the execution of the Area Development Agreement and is non-refundable.
However, a portion of the Development Fee, specifically the Initial Franchise Fee, is credited towards the Initial Franchise Fee payable when signing each individual Franchise Agreement. The balance of the Initial Franchise Fee for the first location is due upon the execution of the Area Development Agreement, along with the Franchise Agreement for the first location. For each subsequent location, the remaining balance of the Initial Franchise Fee is due upon entering into a Franchise Agreement for each additional location.
In Illinois, there is an addendum to the Area Development Agreement that modifies the payment terms. All initial fees, including the Development Fee, are deferred until All States M.E.D. has fulfilled its pre-opening obligations and the franchisee has commenced business operations. This deferral was imposed by the Illinois Attorney General's Office due to All States M.E.D.'s financial condition.