What happens to the Beauty Bungalows Development Fee if the franchisee does not comply with the Development Schedule?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon execution of this Agreement, you must pay us a development fee in the amount specified in Appendix A (the "Development Fee"), which is based on the initial franchise fee you must pay for each Franchised Business that you develop (the "Franchise Fee", which is also specified in Appendix A). The Development Fee will be credited towards 100% of the Franchise Fee due under the Franchise Agreement for each Franchised Business that you develop pursuant to this Agreement, including the Initial Franchise Agreement. The Development Fee is fully earned by us when we and you sign this Agreement and is nonrefundable, even if you do not comply with the Development Schedule.
Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all development fees and initial payments by area developers shall be deferred until the first franchise under the development agreement opens
Source: Item 23 — RECEIPTS (FDD pages 48–177)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the Development Fee is fully earned by Beauty Bungalows when the Area Development Agreement is signed by both parties. This fee is nonrefundable, even if the franchisee fails to comply with the Development Schedule outlined in Appendix A.
This means that a prospective Beauty Bungalows area developer should be fully aware of their ability to meet the obligations of the development schedule before signing the agreement. The Development Fee compensates Beauty Bungalows for granting the development rights, and is not contingent on the franchisee successfully opening the specified number of locations.
It is important to note that in Maryland, initial fees and payments are deferred until Beauty Bungalows completes its pre-opening obligations under the franchise agreement, and development fees and initial payments by area developers are deferred until the first franchise under the development agreement opens.