What is the purpose of the deposit paid by the PROSPECTIVE FRANCHISEE to Big Apple Bagels?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
l consider, subject to the terms and conditions hereof, granting a BAGELS Franchise to PROSPECTIVE FRANCHISEE.
- F. Under a separate offering and disclosure document, Franchisor, BAB Systems, Inc., operates a franchise distribution system to own and operate stores ("My Favorite Muffin Stores") for retail
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, a prospective franchisee must deposit $10,000 with Big Apple Bagels when signing the Preliminary Agreement. This deposit is applied towards the initial franchise fee if Big Apple Bagels subsequently grants the franchise.
However, the deposit is not always fully refundable. If the prospective franchisee withdraws their application before Big Apple Bagels approves a site, Big Apple Bagels will refund the deposit less $3,000. This $3,000 covers expenses Big Apple Bagels incurs while evaluating the prospective franchisee and potential locations, including research, demographic data, preliminary layouts, site inspections, travel, employee compensation, and legal fees.
The FDD also states that the prospective franchisee will not be entitled to any refund of the deposit if they fail to execute the Franchise Agreement within 14 days of site approval by Big Apple Bagels, or if the prospective franchisee fails to submit any sites to Big Apple Bagels within 60 days of executing the Preliminary Agreement. These conditions highlight the importance of carefully considering the terms of the Preliminary Agreement and the potential loss of the deposit.
This type of deposit is a common practice in franchising, intended to cover the franchisor's initial costs and ensure the prospective franchisee's commitment. However, the specific terms and conditions for refunding the deposit can vary significantly between franchise systems, so prospective franchisees should carefully review the Preliminary Agreement and Franchise Disclosure Document to understand their obligations and potential risks.