What is the 'Down Payment' referring to in the Christian Brothers Automotive Receipt and Acknowledgement Letter Agreement?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
Name]:
The purpose of this Receipt and Acknowledgement Letter Agreement (this "Letter Agreement") is to document the understanding between you and Christian Brothers Automotive Corporation ("CBAC") as of the date of this Letter Agreement. You are in the process of becoming a franchisee of CBAC, and you hereby agree to execute CBAC's then-current Franchise Agreement (or cause an entity formed and owned by you for the sole purpose of owning and operating the Franchise to execute CBAC's then-current Franchise Agreement) (the "Franchise Agreement") at a later date in accordance with the following terms. In connection with this process, you have requested that your CBAC franchise (the "Franchise") granted under the Franchise Agreement be located in the [Metropolitan Statistical Area] area (the "Location"). CBAC is in the process of identifying and purchasing Land or acquiring an Existing Business and is incurring expenses in connection with that purchase. "Land" means the land that will be purchased or leased for the construction of a building and other improvements that will be used for the operation of your franchise. "Existing Business" means an operating CBAC franchise business in the general market of the Location. In order to proceed, CBAC and you have agreed that you will pay $85,000 (the "Down Payment") of the initial Franchise Fee under the Franchise Agreement upon the execution of this Letter Agreement. You hereby acknowledge and agree that $13,500 of the Down Payment is non-refundable in consideration of administrative and other expenses CBAC incurs and for lost or deferred opportunities to enter into a franchise agreement with
Source: Item 22 — CONTRACTS (FDD page 76)
What This Means (2025 FDD)
According to the 2025 Christian Brothers Automotive Franchise Disclosure Document, the Down Payment in the Receipt and Acknowledgement Letter Agreement refers to a portion of the initial franchise fee. Specifically, it is an $85,000 payment that the franchisee agrees to make upon executing the Letter Agreement. This agreement documents the understanding between the prospective franchisee and Christian Brothers Automotive as they move towards finalizing the Franchise Agreement. The Franchise Agreement grants the franchisee the right to operate a Christian Brothers Automotive franchise in a specific location.
The purpose of the down payment is to allow Christian Brothers Automotive to proceed with identifying and purchasing land or acquiring an existing business in the franchisee's desired area. The FDD specifies that Christian Brothers Automotive incurs expenses related to this process. The land will be used for constructing a building and other improvements necessary for operating the franchise. An Existing Business refers to an already operating Christian Brothers Automotive franchise in the general market of the Location.
It's important to note that $13,500 of the $85,000 down payment is non-refundable. This portion covers Christian Brothers Automotive's administrative and other expenses, as well as compensation for lost or deferred opportunities to enter into franchise agreements with other potential franchisees. This non-refundable aspect highlights a financial risk for the franchisee, as they will not be able to recoup this amount even if the Franchise Agreement is not ultimately executed.