Why has the Commissioner imposed a fee deferral condition on Chocolate Bash franchises in California?
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, the California Commissioner has imposed a fee deferral condition due to the franchisor's capitalization. Specifically, the Department has determined that Chocolate Bash has not demonstrated adequate capitalization and/or that it must rely on franchise fees to fund its operations.
This fee deferral condition mandates that Chocolate Bash defer the collection of all initial fees from California franchisees. This deferral lasts until Chocolate Bash has fulfilled all of its pre-opening obligations and the franchisee's Chocolate Bash location is open for business.
For California franchisees who enter into a development agreement, the payment of development and initial fees attributable to a specific unit in their development schedule is also deferred. This deferral continues until that specific unit is open. This condition protects franchisees by ensuring that they only pay the initial franchise fee after Chocolate Bash has provided the necessary support to get their business up and running.