In California, what is the effect of the Commissioner's determination that Buona must rely on franchise fees to fund its operations?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations.
The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchisees until we have completed all of our pre-opening obligations and you are open for business.
For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in your development schedule is deferred until that unit is open.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the California Department has determined that Buona has not demonstrated adequate capitalization and/or must rely on franchise fees to fund its operations. As a result, the Commissioner has imposed a fee deferral condition for California franchisees. This means that Buona will defer the collection of all initial franchise fees from California franchisees until Buona has completed all of its pre-opening obligations and the franchisee is open for business.
For California franchisees who sign a development agreement with Buona, the payment of the development and initial fees attributable to a specific unit in the development schedule is deferred until that specific unit is open. This deferral of fees provides a significant benefit to California franchisees, as it reduces the upfront financial burden of opening a new franchise.
This condition imposed by the California Commissioner aims to protect franchisees by ensuring that Buona is incentivized to provide the necessary support and fulfill its pre-opening obligations before receiving the initial franchise fees. Prospective franchisees in California should carefully consider this fee deferral condition and its implications for their initial investment and the timing of their payments to Buona.