In California, what is the consequence if Buona relies on franchise fees to fund its operations?

According to Buona's 2025 Franchise Disclosure Document, if Buona is found to be relying on franchise fees to fund its operations in California, the California Department has determined that Buona has not demonstrated that it is adequately capitalized. As a result, a fee deferral condition is imposed. This condition mandates that Buona must defer the collection of all initial fees from California franchisees until all pre-opening obligations are completed and the franchisee is open for business.

For prospective Buona franchisees in California, this means they will not be required to pay the initial franchise fee until their location is ready to open. This arrangement can be advantageous for franchisees as it reduces the upfront financial burden and aligns the franchisor's interests with the successful launch of the franchise. It also provides a level of assurance that Buona is committed to providing the necessary support and resources to get the franchise operational before receiving the initial fee.

Furthermore, for California franchisees who sign a development agreement, the payment of development and initial fees attributable to a specific unit in their development schedule is deferred until that unit is open. This deferral applies to each unit within the development schedule, providing a consistent financial benefit across multiple locations. This condition is specific to California and aims to protect franchisees by ensuring that Buona is financially stable and not overly reliant on franchise fees for its operational funding.