How does the Brightstar Care initial franchise fee (Item 5) relate to the obligations of the franchisee (Item 9)?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
N OPTION AGREEMENT**
EXPANSION OPTION AGREEMENT
| over time at the greater of the actual GMF fees earned or the contract monthly minimum each | |||||||
|---|---|---|---|---|---|---|---|
| month, and marketing expenses are recognized when incurred within the Company’s consolidated | |||||||
| statements of income. | GMF income | was | $13,476,528 | and | $12,833,485 | for the | years ended |
| December 31, 2023 and January 1, 2023, respectively, | and is included | within the consolidated | |||||
| statements of income. | GMF expense | was | $12,493,237 | and | $12,572,362 | for the | years ended |
2. Grant of Expansion Option
Subject to the terms and conditions of this Agreement and the Franchise Agreement, BrightStar grants to you, and you accept, an option to acquire from BrightStar the right to open and operate an additional BrightStar Care Agency in the Expansion Territory. In consideration of your payment of the Expansion Option Fee (defined below), BrightStar agrees that it will not offer or sell the right to open and operate a BrightStar Care Agency in the Expansion Territory to any third party during the Option Period (defined below) of this Agreement.
3. Expansion Option Fee
In consideration for BrightStar granting the expansion option under this Agreement, you agree to pay BrightStar a fee equal to Ten Thousand Dollars ($10,000) (the "Expansion Option Fee"). This sum will be due in full when you sign this Agreement and will be considered fully earned by BrightStar when paid, in consideration of BrightStar granting you the expansion option. The Expansion Option Fee is not refundable in whole or in part under any circumstance, including if the expansion option granted to you under this Agreement lapses. However, if you exercise your option and enter into a BrightStar Franchising, LLC Agency franchise agreement for the Expansion Territory during the Option Period, then BrightStar will credit the Expansion Option Fee you paid BrightStar toward the Initial Franchise Fee payable under the BrightStar Franchising, LLC Agency franchise agreement for the Expansion Territory. If you do not execute a BrightStar Franchising, LLC Agency franchise agreement for the Expansion Territory during the Option Period, then the expansion option granted to you under this Agreement will lapse and you will no longer have the option to acquire from BrightStar the right to open and operate an additional BrightStar Care Agency in the Expansion Territory.
4. Option Period
You may exercise the expansion option granted under this Agreement only within one (1) year following the opening of the Agency (the "Option Period"). BrightStar may, in its sole discretion, extend the Option Period if it determines that you are making sufficient progress toward the requirements you must satisfy in order to exercise your expansion option.
5. Expansion Territory
The Expansion Territory under this Agreement includes the geographic area described on Exhibit A to this Agreement.
6. Rights and Obligations During the Option Period
During the Option Period, you have the non-exclusive right to market and service clients located in the Expansion Territory pursuant to the terms of the Franchise Agreement. All income or revenue you generate in the Expansion Territory will be treated as Net Billings, as that term is defined in the Franchise Agreement, and will be subject to the same conditions and obligations set forth in the Franchise Agreement, including but not limited to, all Royalty/Continuing Fee obligations. However, except for income or revenue you generate from servicing National Account clients located in the Expansion Territory, no income or revenue you generate in the Expansion Territory will count toward your Monthly Performance Standards or any other Net Billings thresholds under the Franchise Agreement. You acknowledge and agree that BrightStar Agencies operated by us, our affiliates, or our franchisees also have the right to market and service clients located in the Expansion Territory during the Option Period.
7.
What This Means (2025 FDD)
Based on the 2025 Brightstar Care Franchise Disclosure Document, the initial franchise fee is related to the franchisee's obligations through an expansion option. Specifically, franchisees may have the option to acquire the right to open and operate an additional Brightstar Care Agency in an Expansion Territory. To obtain this option, the franchisee must pay Brightstar Care an Expansion Option Fee of $10,000. This fee is non-refundable and is considered fully earned by Brightstar Care upon payment for granting the expansion option. However, if the franchisee exercises the expansion option and enters into a Brightstar Franchising, LLC Agency franchise agreement for the Expansion Territory during the Option Period, Brightstar Care will credit the $10,000 Expansion Option Fee toward the Initial Franchise Fee payable under the new franchise agreement.
The franchisee's right to exercise the expansion option and enter into a franchise agreement for the Expansion Territory is conditional. The franchisee must demonstrate they have met Brightstar Care's expansion policy requirements, which may include minimum Net Billings and a minimum amount of liquidity. Additionally, at the time of exercising the expansion option, the franchisee must be in full compliance with all obligations under their existing Franchise Agreement and any other agreements with Brightstar Care. They must not be in default of any provision of the Franchise Agreement or any other agreement with Brightstar Care, and they must have substantially complied with all terms and conditions of such agreements during their terms.
Furthermore, the franchisee must have satisfied all monetary obligations owed to Brightstar Care and have met those obligations in a timely manner throughout the term of the Franchise Agreement. The Franchise Agreement must also be in full force and effect and not expired or terminated for any reason. Until the franchisee has exercised the expansion option and signed a Brightstar Franchising, LLC Agency franchise agreement for the Expansion, they are not considered a franchisee with respect to the expansion territory. This means that while the initial franchise fee (or a credit towards it) grants the right to operate a Brightstar Care agency, fulfilling ongoing obligations is crucial for franchisees looking to expand their territory.