For California franchisees, when is Chocolate Bash required to defer the collection of initial fees?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
isor are deferred until Franchisor has delivered all pre-opening obligations and Franchisee is open for business.
4.2 Training Fee. Upon signing this Agreement, Franchisee shall pay a training fee of $15,000 to CB Franchising. This fee is not refundable.
By order of the California Department of Business Oversight, all initial fees payable to the Franchisor are deferred until Franchisor has delivered all pre-opening obligations and Franchisee is open for business.
4.3 Site Selection Fee. Upon signing this Agreement, Franchisee shall pay a site selection fee of $5,000 to CB Franchising. This fee is not refundable.
By order of the California Department of Business Oversight, all initial fees payable to the Franchisor are deferred until Franchisor has delivered all pre-opening obligations and Franchisee is open for business.
4.4 Royalty Fee. Franchisee shall pay CB Franchising a weekly royalty fee (the "Royalty Fee") equal to 6% of Gross Sales. The Royalty Fee for any given month is due by the 5th day of the following month.
4.5 Marketing Contributions.
- (a) Marketing Fund Contribution.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the collection of all initial fees from California franchisees is deferred until Chocolate Bash has completed all of its pre-opening obligations and the franchisee is open for business. This deferral is mandated by the California Department of Business Oversight.
For California franchisees who sign a development agreement with Chocolate Bash, the payment of development and initial fees attributable to a specific unit in the development schedule is deferred until that specific unit is open. This means that franchisees are not required to pay these fees upfront but rather as each unit within their development agreement becomes operational.
This deferral of fees is a significant benefit for California franchisees as it reduces the initial financial burden and aligns the payment of fees with the commencement of business operations. It also suggests that Chocolate Bash may have had to demonstrate to California regulators that it is adequately capitalized and not overly reliant on initial franchise fees to fund its operations.
Specifically, the training fee of $15,000 and the site selection fee of $5,000, which are typically paid upon signing the agreement, are deferred for California franchisees until the pre-opening obligations are met and the franchisee is open for business.