When is the Development Fee for a Body20 development agreement fully earned, and is it refundable?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.2 Development Fee. Upon execution of this Agreement, you must pay us a development fee in the amount specified on Appendix A (the “Development Fee”), which will be equal to 100% of the aggregate of all of the Franchise Fees due for the Studios that you commit to develop under this Agreement.
- 2.3 Application of Fee and Non-refundability. The Development Fee will be credited towards the Franchise Fee due for each Studio that you develop pursuant to this Agreement. Thus, there shall be no additional Franchise Fee due under each Franchise Agreement signed pursuant to this Development Agreement. The Development Fee is fully earned by us when we and you sign this Agreement and is non-refundable, even if you do not develop Studios in accordance with the Development Schedule.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, the Development Fee is considered fully earned by Body20 when the Development Agreement is signed by both parties. This fee is non-refundable, regardless of whether the franchisee fulfills their development obligations according to the agreed-upon Development Schedule.
This means that a prospective Body20 franchisee entering into a Development Agreement should be fully aware that the Development Fee is at risk once the agreement is signed. Even if the franchisee fails to open the agreed-upon number of studios or encounters unforeseen circumstances that prevent them from meeting the development schedule, Body20 is not obligated to return any portion of the Development Fee.
This non-refundable policy is a significant financial consideration for potential Body20 developers. It highlights the importance of carefully evaluating the market, securing adequate financing, and thoroughly understanding the terms and conditions of the Development Agreement before signing. Franchisees should conduct due diligence and seek professional advice to assess their ability to meet the development schedule and minimize the risk of losing the Development Fee.
Body20's right to retain the Development Fee even if the franchisee fails to develop the studios is further reinforced in Section 6.2(a) of the franchise agreement, which states that upon termination of the agreement for any reason, Body20 will retain the Development Fee, and the franchisee will not be relieved of any obligations or liabilities. This underscores the importance of fulfilling the development obligations outlined in the agreement.