What is the relationship between the Initial Fee and the Franchise Agreement for Crawlspace Medic?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
4.2 Application of Development Fee. Contemporaneous with the execution of this Agreement, Developer shall execute the initial Franchise Agreement for the first Crawlspace Medic outlet to be established pursuant to the Mandatory Development Schedule. Developer shall receive a corresponding credit from the Development Fee, which shall be applicable to the Initial Franchise Fee due under the initial Franchise Agreement. Upon the execution of each of additional Franchise Agreement for outlets to be developed hereunder, Developer shall receive a corresponding credit from the Development Fee, which shall be applicable to the full amount of the Initial Franchise Fee payable pursuant to each such additional Franchise Agreement. Upon Franchisor's approval, Developer may enter into the initial Franchise Agreement or any subsequent Franchise Agreement as required under this Agreement using a newly formed entity, such as a limited liability company, corporation or partnership, for the sole purpose of entering into a Franchise Agreement and operating the Crawlspace Medic outlet pursuant thereto, provided that Developer shall also personally sign such Franchise Agreement as a principal.
5 EXERCISE OF DEVELOPMENT RIGHTS.
5.1 Valid Exercise. Developer shall exercise the development rights granted hereunder only by entering into a separate Franchise Agreement with Franchisor for each Crawlspace Medicoutlet for which a development right is granted. Developer shall execute and deliver to Franchisor, concurrently with the execution and delivery of this Agreement, Franchisor's current form of Franchise Agreement for the first Crawlspace Medic outlet to be established by Developer pursuant to the Mandatory Development Schedule. For each subsequent Crawlspace Medic outlet to be established hereunder, Developer shall execute and deliver to Franchisor Franchisor's then-current form of Franchise Agreement, which shall be presented to Developer together with Franchisor's then-current Franchise Disclosure Document. The then-current form of Franchise Agreement may differ from the current form of Franchise Agreement; provided however, the initial franchise fee for each additional outlet shall be the applicable amount set forth in in Section 4.1 hereof.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to the 2024 Crawlspace Medic Franchise Disclosure Document, the initial franchise fee is related to the franchise agreement, especially in the context of a multi-unit development agreement. A developer who signs a Multi-Unit Development Agreement to open multiple Crawlspace Medic locations will pay a Development Fee. This fee is fully earned by Crawlspace Medic upon signing the agreement and is non-refundable.
Contemporaneously with the execution of the Multi-Unit Development Agreement, the developer must also execute an initial Franchise Agreement for the first Crawlspace Medic outlet. The developer receives a credit from the Development Fee that is then applied to the Initial Franchise Fee due under this initial Franchise Agreement. This credit mechanism extends to each additional Franchise Agreement executed for subsequent outlets under the development schedule, with a corresponding credit from the Development Fee applicable to the Initial Franchise Fee for each new franchise.
This arrangement means that while a developer pays a Development Fee upfront for the rights to open multiple locations, this fee is then used to offset the initial franchise fees for each individual Crawlspace Medic franchise they open. The FDD specifies that the developer's right to operate a Crawlspace Medic outlet is derived only through the execution of a Franchise Agreement for each location. The initial franchise fee for each additional outlet will be the applicable amount set forth in Section 4.1 of the agreement.