Is the All States M.E.D. Development Fee refundable?
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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Source: Item 5 — INITIAL FEES (FDD pages 11–12)
What This Means (2024 FDD)
According to the 2024 All States M.E.D. Franchise Disclosure Document, the Development Fee associated with an Area Development Agreement (ADA) is not refundable. If a prospective franchisee signs an ADA to develop multiple All States M.E.D. businesses, they must pay an initial franchise fee of $100,000 for the first franchise. They also pay a Development Fee for each subsequent business to be developed. The Development Fee is paid in a lump sum when the ADA is signed. For developing 3-5 outlets, the Development Fee ranges from $200,000 to $300,000.
All States M.E.D. considers the Development Fee fully earned upon the execution of the Area Development Agreement. This means that once the agreement is signed, All States M.E.D. is entitled to retain the fee, regardless of whether the franchisee successfully develops all the planned locations. The FDD states that the Development Fee will not be credited against any other fees. However, the portion of the initial franchise fee included in the Development Fee is credited against the Initial Franchise Fee payable upon the signing of each individual Franchise Agreement.
This non-refundable policy is a significant financial consideration for potential area developers. It means that if a developer fails to meet the development schedule outlined in the ADA, All States M.E.D. can terminate the agreement and retain the Development Fee. This could result in a substantial financial loss for the developer, especially if they have only opened a few of the planned locations. Therefore, prospective franchisees should carefully assess their ability to meet the development schedule and their overall financial capacity before entering into an Area Development Agreement with All States M.E.D.
It is important to note that while the standard policy is non-refundable, there can be exceptions. For example, the Illinois Addendum to the Area Development Agreement states that the payment of the Development Fee is deferred until the first franchise business opens. This deferral was imposed by the Illinois Attorney General's Office due to All States M.E.D.'s financial condition. This highlights the importance of reviewing any state-specific addenda to the franchise agreement, as they may contain provisions that modify the standard terms.