What is the definition of 'pre-opening obligations' that Chocolate Bash Franchising LLC must complete before collecting initial fees 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.
5.4 Pre-Opening Assistance.
- (a) Selecting Location. CB Franchising shall provide its criteria for Chocolate Bash locations to Franchisee. CB Franchising will review and advise Franchisee regarding potential locations submitted by Franchisee.
- (b) Pre-Opening Plans, Specifications, and Vendors. Within a reasonable period of time after the Effective Date, CB Franchising shall provide Franchisee with (i) CB Franchising's sample set of standard building plans and specifications and/or standard recommended floor plans; (ii) the applicable System Standards, (iii) other specifications as CB Franchising deems appropriate (which may include specifications regarding inventory, supplies, materials, and other matters), and (iv) CB Franchising's lists of Approved Vendors and/or Required Vendors.
- (c) Pre-Opening Training. CB Franchising shall make available its standard preopening training to the Principal Executive and up to 2 other employees, at CB Franchising's headquarters and/or at a Chocolate Bash business designated by CB Franchising. CB Franchising shall not charge any fee for this training. Franchisee is responsible for its own travel, lodging, meal, and other out-of-pocket expenses. CB Franchising reserves the right to vary the length and content of the initial training program based on the experience and skill level of any individual attending the program.
- (d) Market Introduction Plan. CB Franchising shall advise Franchisee regarding the planning and execution of Franchisee's market introduction plan.
- (e) On-Site Opening Assistance. CB Franchising shall have a representative support Franchisee's business opening with at least 3 days of onsite opening training and assistance.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, the franchisor, Chocolate Bash Franchising LLC, is subject to a fee deferral condition imposed by the California Department of Business Oversight. This condition prevents Chocolate Bash from collecting any initial fees from California franchisees until all pre-opening obligations have been completed and the franchise location is open for business. For franchisees in California who sign a development agreement, the payment of development and initial fees for each specific unit is deferred until that unit is open.
Chocolate Bash's pre-opening obligations include several key assistance activities. These include providing criteria for selecting the location, reviewing potential locations submitted by the franchisee, and offering advice regarding these locations. Chocolate Bash also needs to provide standard building plans and specifications, system standards, and lists of approved vendors.
Furthermore, Chocolate Bash must provide standard pre-opening training to the Principal Executive and up to two other employees at their headquarters or a designated Chocolate Bash location. They also advise the franchisee on planning and executing their market introduction plan. Finally, Chocolate Bash must support the business opening with at least three days of on-site opening training and assistance.
This deferral of fees is a significant benefit for California franchisees, as it ensures that Chocolate Bash is fully invested in providing the necessary support and assistance to get the franchise up and running before receiving any initial fees. This arrangement reduces the financial risk for the franchisee and aligns the franchisor's interests with the franchisee's success during the critical pre-opening phase.