In Virginia, when are Bambu franchisees required to pay the development fee under the Development Agreement?

According to Bambu's 2025 Franchise Disclosure Document, franchisees in Virginia are not required to pay the development fee upon signing the Development Agreement. Instead, the Virginia State Corporation Commission's Division of Securities and Retail Franchising mandates that Bambu must defer the payment of the Development Fee until Bambu has fulfilled its pre-opening obligations under the Franchise Agreement for the franchisee's first Bambu shoppe. This condition is explicitly included as a rider to the MUD Agreement for Virginia. This means a prospective franchisee in Virginia will have more time before needing to pay the development fee.

This deferral is a protective measure implemented by the Virginia regulatory body to ensure that Bambu fulfills its initial obligations to the franchisee before receiving the development fee. By delaying the payment, the franchisee is somewhat shielded from financial loss if Bambu fails to provide the necessary support and services for the establishment of the franchise. This contrasts with the standard practice where development fees are typically paid upon signing the agreement, as acknowledged in section 2.1(a) of the FDD, where it states that the Development Fee is paid concurrently with the execution of the MUD Agreement.

It's important to note that while Bambu includes this language as a condition of registration, they state that they do not agree with the language and believe that each of the provisions of the agreement are fully enforceable. Bambu intends to fully enforce all of the provisions of the agreement and all other documents signed by them. Despite Bambu's disagreement with the deferral requirement, the Virginia rider legally supersedes the standard payment terms outlined in the Development Agreement, providing a financial safeguard for franchisees in Virginia.

Prospective franchisees in Virginia should carefully review the Virginia Rider to the MUD Agreement and understand the specific pre-opening obligations that Bambu must complete before the development fee becomes due. They should also consult with a legal professional to fully understand their rights and obligations under the Development Agreement and the Virginia Rider.