For California Chocolate Bash franchisees with a development agreement, when is the development fee attributable to a specific unit due?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
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- 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 pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, due to requirements by the California Department of Business Oversight, Chocolate Bash defers the collection of initial fees from California franchisees. For California franchisees who sign a development agreement, the payment of the development and initial fees attributable to a specific unit in the development schedule is deferred until that unit is open.
This means that a Chocolate Bash franchisee in California with a development agreement will not have to pay the development fee for a specific unit until that particular unit has completed all pre-opening obligations and is officially open for business. This deferral is in place because Chocolate Bash has not demonstrated that they are adequately capitalized and/or that they must rely on franchise fees to fund their operations.
This arrangement benefits the franchisee by reducing the upfront financial burden and aligning the fee payment with the commencement of operations and potential revenue generation. It also mitigates some risk for the franchisee, as they are not paying fees until Chocolate Bash has fulfilled its pre-opening obligations. Prospective franchisees should confirm with Chocolate Bash that all pre-opening obligations are clearly defined in the franchise agreement.