Is there a Development Agreement included in the Cost Cutters Family Hair Salon FDD?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
greement**
In addition to signing a Franchise Agreement, if you want to develop more than one Store, you must also sign a development agreement (the "Development Agreement") under which we grant you the right, and you accept the responsibility, to develop a specified number of Cost Cutters Stores in a Designated Market Area ("Development Area"). A copy of our Development Agreement is attached as Exhibit E. Under the Development Agreement, you must open the agreed-upon number of Cost Cutters Stores ("Minimum Development Quotas"), within specified period of time ("Development Periods"). If
you fail to do so, your Development Agreement and Franchise Agreement will either automatically expire or be subject to termination by The Barbers, depending on your Store development commitment (See Item 12).
The Barbers currently grants development rights for three ("3-Store"), six ("6-Store"), or multiple stores under the "Fast Start Program". If you acquire the right to develop just one Cost Cutters Store, you will sign a Franchise Agreement for that Cost Cutters Store. If you acquire 3-Store or 6-Store development rights under the Fast Start Program, you will concurrently sign the Development Agreement and the Franchise Agreement for the first Store to be developed. You sign The Barbers' then current standard Franchise Agreement for each subsequent Cost Cutters Store you open according to the Development Agreement.
c. The Asset Purchase Agreement
We and our affiliates may also sell and franchise existing company-owned Cost Cutters Stores to you as well as salons under a brand owned by our affiliate that you must convert to a Cost Cutters Store (a "Vendition Store"). If you acquire a Vendition Store, you will purchase the Vendition Store's assets from us or from our affiliate if acquiring a salon using a different brand, as applicable, at a negotiated price based on our valuation of the tangible assets of the Cost Cutters Store or salon and its related goodwill. You and The Barbers or our affiliate will sign an Agreement for Purchase and Sale of Assets, the form of which is attached in Exhibit N, to acquire the assets of the Cost Cutters Store or the salon, as applicable (the "Asset Purchase Agreement"). In addition to the Asset Purchase Agreement, you must simultaneously sign a Franchise Agreement, a Development Agreement, and, if applicable, a Sublease for Walmart Sites, the form of which is attached in Exhibit G. In addition to the cost of purchasing the assets and the franchise fees, you may incur additional costs to upgrade or convert the location to The Barbers' and/or Walmart's then current standards. If you acquire a Vendition Store, that store will count as one of the Cost Cutters Stores to be developed under a Development Agreement.
As a condition to your purchase of a Vendition Store, we may require you to develop at least one new Cost Cutters Store (each a "New Store"). The Barbers' current practice is to require you to develop one additional New Store for every three Vendition Stores you acquire. For example, if you acquire five Vendition Stores, we may require you to develop at least one New Store. However, if you acquire six to eight Vendition Stores we may require you to develop at least two New Stores.
Our Parent, Predecessors and Affiliates
**a.
Source: Item 22 — CONTRACTS (FDD page 76)
What This Means (2024 FDD)
Yes, according to the 2024 Cost Cutters Family Hair Salon Franchise Disclosure Document, a Development Agreement is part of the franchise system. If a franchisee wants to develop more than one Cost Cutters Family Hair Salon store, they must sign a Development Agreement. This agreement grants the franchisee the right and responsibility to develop a specified number of stores within a Designated Market Area. A copy of the Development Agreement is included as Exhibit E in the FDD.
The Development Agreement requires the franchisee to open an agreed-upon number of Cost Cutters Family Hair Salon stores, known as Minimum Development Quotas, within a specified time frame, referred to as Development Periods. Failure to meet these quotas may result in the expiration or termination of both the Development Agreement and the Franchise Agreement by The Barbers. The Barbers currently grants development rights for three ("3-Store"), six ("6-Store"), or multiple stores under the "Fast Start Program".
Furthermore, the FDD states that if a franchisee acquires the right to develop just one Cost Cutters Family Hair Salon store, they will sign a Franchise Agreement for that store. However, if they acquire 3-Store or 6-Store development rights under the Fast Start Program, they will concurrently sign the Development Agreement and the Franchise Agreement for the first store to be developed. For each subsequent Cost Cutters Family Hair Salon store opened according to the Development Agreement, the franchisee will sign The Barbers' then-current standard Franchise Agreement.
Additionally, if a franchisee purchases an existing Cost Cutters Family Hair Salon store or a salon under a different brand that must be converted to a Cost Cutters Family Hair Salon store (a "Vendition Store"), they must also sign a Development Agreement. The number of new Cost Cutters Family Hair Salon stores the franchisee may be required to develop depends on the number of Vendition Stores acquired. The Barbers' current practice is to require the development of one additional New Store for every three Vendition Stores acquired. For example, acquiring five Vendition Stores may require the development of at least one New Store, while acquiring six to eight Vendition Stores may require at least two New Stores.