Is the Alloy Development Fee refundable?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
- A. As consideration for the rights granted in this Agreement, you must pay us a "Development Fee" in the amount designated on the Data Sheet. The Development Fee is consideration for this Agreement and not consideration for any Franchise Agreement, is fully earned by us upon receipt and is nonrefundable.
This Addendum pertains to franchises sold in the State of South Dakota and is for the purpose of complying with South Dakota statutes and regulations. Notwithstanding anything which may be contained in the body of the Area Development Agreement to the contrary, the Agreement is amended as follows:
- The following sentence is hereby added to the end of Section 3.A, Development Fee:
Due to the financial condition of the Franchisor, the South Dakota Securities Regulation Office has required a financial assurance. Therefore, all development fees and initial payments by area developers shall be deferred until the first Facility developed under the development agreement opens.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the Development Fee is generally nonrefundable. Specifically, the FDD states that the Development Fee is fully earned by Alloy upon receipt and is nonrefundable. This fee serves as consideration for the rights granted to the developer under the Development Agreement, not for any individual Franchise Agreement.
This means that a prospective Alloy developer should understand that once the Development Fee is paid, it will not be returned, regardless of whether the developer successfully establishes any Alloy facilities. This is a standard practice in franchising, as the fee compensates the franchisor for the initial work involved in granting development rights and providing support to the developer.
However, there is an exception for franchises sold in South Dakota. Due to Alloy's financial condition, the South Dakota Securities Regulation Office requires a financial assurance. Therefore, all development fees and initial payments by area developers in South Dakota are deferred until the first Facility developed under the development agreement opens. This addendum modifies the original agreement, ensuring that developers in South Dakota do not pay the development fee until a facility is operational, providing a level of financial protection.