Can the All States M.E.D. Development Fee be credited against other fees?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
Development Program
If you sign an Area Development Agreement ("ADA") and become an area developer, you will pay us the Initial Franchise Fee of $100,000 for your first franchise and a development fee ("Development Fee") based on the number of Businesses to be developed. The number of Businesses required by the Development Schedule will be determined by a number of factors, such as the size of the Development Area, the population of the Development Area, and your financial capacity and expertise in developing businesses. The Development Fee for each Business that you develop will be $50,000. You will be required to sign our then-current Franchise Agreement for each Business. The Development Fee is paid in a lump sum at the time the ADA is signed, is uniform to all developers currently acquiring development rights, is not refundable and will not be credited against any other fees paid to us or our affiliates. The Development Fee for 3-5 outlets is $200,000 - $300,000.
Refundability of Initial Fees.
The initial fees discussed above are uniformly imposed, are fully earned when the franchise agreement is signed, and are non-refundable.
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ITEM 6. OTHER FEES
| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Royalty Fee1 | 8% of Gross Revenues | Due monthly by the 10th of the month for the previous month | "Gross Revenue" means all of your revenue from operating the franchise, but excluding taxes collected from customers and paid to taxing authority, and reduced by the amount of any documented refunds, credits, allowances, and chargebacks the Business in good faith gives to customers. FA 3.2. |
| Local Advertising | The greater of 2% of Gross Revenues or $1,000 per month | Monthly | You are required to spend these sums on local advertising and promotions pursuant to our guidelines. FA 11.2. |
| Grand Opening Advertising | $3,000 - $10,000 | Around the time of opening | You agree to pay these sums to promote the opening of your business pursuant to our guidelines. FA 11.2. |
Source: Item 5 — INITIAL FEES (FDD pages 11–12)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, the Development Fee is generally not credited against other fees, but a portion of the initial franchise fee included in the Development Fee can be credited. Specifically, if you sign an Area Development Agreement (ADA) to develop multiple All States M.E.D. businesses, you will pay an initial franchise fee of $100,000 for the first franchise, plus a Development Fee for each additional business. The Development Fee varies based on the number of businesses to be developed, with a range of $200,000 to $300,000 for 3-5 outlets.
The FDD states that the Development Fee is paid in a lump sum when the ADA is signed and is uniform for all developers. It is explicitly stated that the Development Fee is not refundable and will not be credited against any other fees paid to All States M.E.D. or its affiliates. However, the portion of the initial franchise fee that is included in the Development Fee is credited against the initial franchise fee payable upon signing each individual Franchise Agreement.
In practical terms, this means that while the Development Fee itself is non-refundable and cannot be used to offset other fees, a portion of it covers the initial franchise fees for subsequent locations. For example, if the initial franchise fee is $100,000, a portion of the Development Fee covers this fee for each location after the first. The balance of the initial franchise fee for the first location must be paid when signing the Area Development Agreement and the Franchise Agreement for the first location. The balance of the initial franchise fee for subsequent locations is due upon entering into a Franchise Agreement for each additional location.
Prospective franchisees should carefully consider these payment terms and ensure they understand how the Development Fee and initial franchise fees are applied, especially when planning the development of multiple All States M.E.D. locations. Understanding these financial obligations is crucial for managing the investment required to expand the franchise business.