When are Chem Dry transfer fees recognized?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
A. INITIAL LICENSE FEE
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- FRANCHISEE agrees to pay a non-recurring and non-refundable initial fee (the "Initial Fee") comprised of the following:
- a. An initial license fee in the amount as set for on the Summary Page of this Agreement for the right to use the Marks during the term of this Agreement (the "Initial License Fee"); and
- b. An initial advertising, cleaning solution, and equipment package fee in the amount as set forth on the Summary Page of this Agreement, not including state or local taxes, which can vary, (the "Initial Package").
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- If CDI agrees to finance the Initial License Fee, FRANCHISEE shall pay a down payment in the amount as set forth on the Summary Page when FRANCHISEE signs this Agreement and FRANCHISEE will sign and deliver to CDI FRANCHISEE'S Business Note (the "Business Note") for the balance of the Initial License Fee. The Business Note is payable whether or not this Agreement terminates and is not subject to any claim, set off or defenses arising under this Agreement. CDI may assign, pledge or transfer the Business Note to a third party without notice to FRANCHISEE.
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- Upon execution of this Agreement by CDI, the Initial License Fee shall be deemed fully earned and non-refundable.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
Based on the 2024 Chem Dry Franchise Disclosure Document, the initial license fee is deemed fully earned and non-refundable upon the execution of the Franchise Agreement by Chem Dry. This means that once Chem Dry signs the agreement, the franchisee is obligated to pay the initial license fee, regardless of whether the agreement is later terminated.
If Chem Dry agrees to finance the Initial License Fee, the franchisee must make a down payment as specified on the Summary Page when signing the agreement. Additionally, the franchisee will sign and deliver a Business Note for the remaining balance of the Initial License Fee. This Business Note remains payable even if the agreement terminates and is not subject to any claims or defenses arising under the agreement. Chem Dry retains the right to assign, pledge, or transfer the Business Note to a third party without notifying the franchisee.
For a prospective Chem Dry franchisee, this indicates a significant financial commitment from the outset. The initial license fee is non-refundable, emphasizing the importance of thorough due diligence before signing the agreement. The franchisee should carefully consider the terms of the Business Note, understanding that it is an unconditional obligation separate from the performance of the franchise agreement. The ability of Chem Dry to transfer the Business Note to a third party also means the franchisee's payment obligations could be directed to a different entity.