What specific section of the Alloy Area Development Agreement is amended regarding the Development Fee due to the financial condition of the Franchisor?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
rt will not bar the voluntary settlement of disputes.
No disclaimer, questionnaire, clause, or statement signed by a franchisee in connection with the commencement of the franchise relationship shall be construed or interpreted as waiving any claim of fraud in the inducement, whether common law or statutory, or as disclaiming reliance on or the
right to rely upon any statement made or information provided by any franchisor, broker or other person acting on behalf of the franchisor that was a material inducement to a franchisee's investment. This provision supersedes any other or inconsistent term of any document executed in connection with the franchise.
ADDENDUM TO THE FRANCHISE AGREEMENT REQUIRED FOR MINNESOTA FRANCHISEES
This Addendum pertains to franchises sold in the State of Minnesota and is for the purpose of complying with Minnesota statutes and regulations. Notwithstanding anything which may be contained in the body of the Franchise Agreement to the contrary, the Agreement is amended as follows:
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- We will undertake the defense of any claim of infringement by third parties involving the ALLOY Trademark, and you will cooperate with the defense in any reasonable manner prescribed by us with any direct cost of such cooperation to be borne by us.
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- Minnesota law provides franchisees with certain termination and nonrenewal rights. As of the date of this Franchise Agreement, Minn. Stat. Sec. 80C.14, Subd. 3, 4 and 5 require, except in certain specified cases, that a franchisee be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice for nonrenewal of the franchise agreement.
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- The following sentence is hereby added to the end of Section 9.A, Initial Franchise Fee:
Due to the financial condition of the Franchisor, the Minnesota Department of Commerce has required a financial assurance. Therefore, we have posted a surety bond which is on file with the State of Minnesota. A copy of the surety bond is attached as an exhibit to the Minnesota addenda pages.
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- Section 16.I is modified to reflect that Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J prohibit us from requiring litigation to be conducted outside of Minnesota.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, several states have addenda that address amendments to the Area Development Agreement related to the development fee due to Alloy's financial condition. Specifically, for franchisees in Minnesota, the FDD states that Section 3.A, Development Fee, is amended. Similarly, for Illinois, Section 3.A, Development Fee, is also amended. In South Dakota, Section 3.A, Development Fee, is amended; furthermore, all development fees and initial payments by area developers are deferred until the first facility opens. These amendments are required by each state's regulatory office due to Alloy's financial condition.
These amendments have significant implications for prospective Alloy area developers. In Minnesota and Illinois, Alloy has posted surety bonds with the respective state authorities as a financial assurance. A copy of the surety bond is attached as an exhibit to the addenda pages for each state. This suggests that while the development fee structure itself might not change, Alloy has provided a financial guarantee to protect developers. In South Dakota, the development fees and initial payments are deferred, meaning developers in South Dakota do not have to pay these fees until the first facility developed under the agreement opens. This could ease the initial financial burden on developers in that state.
It is important for prospective area developers to carefully review the specific addendum for their state to understand the exact modifications to the Area Development Agreement. The financial condition of a franchisor can be a critical factor in the success of a franchise, and these state-specific requirements indicate that Alloy's financial situation warrants careful consideration. By requiring financial assurances or deferring payments, state regulators aim to protect franchisees and developers from potential financial risks associated with the franchisor's financial condition. Therefore, prospective developers should seek clarification from Alloy regarding its current financial status and the implications of these addenda on their investment and operational plans.