Does the deposit for a Creative World School franchise agreement bear interest?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
signated by us (the "Territory"). To determine whether to grant you a Franchise, we must evaluate your credentials and determine the feasibility of adding School(s) in the Territory. We incur various expenses in making those evaluations and determinations.
Accordingly, the parties agree as follows:
OPERATIVE TERMS
-
- Deposit: Contemporaneously with signing this Agreement, you have deposited $5,000 (the "Deposit") with us. If we grant a Franchise to you, this Deposit will be credited toward the initial franchise fee payable in accordance with the Franchise Agreement. The Deposit will not bear interest. We will not establish a separate account for the Deposit. You recognize that we incur significant expenses in evaluating your qualifications and evaluating sites for a School. Once you and we have approved a site for a School that we have determined can be acquired on reasonably acceptable terms by lease or purchase, then the Deposit is not refundable under any circumstances. We will only refund a portion of the Deposit to you if: (a) you and we both do not sign a Franchise Agreement; and (b) we have not approved a proposed site for a School within 180 days of signing this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School Franchise Disclosure Document, the initial deposit of $5,000 does not bear interest. This deposit is submitted when signing the agreement and is credited towards the initial franchise fee if the franchise is granted. Creative World School does not establish a separate account for the deposit.
This means that prospective franchisees should not expect to earn any interest income on the deposit amount while it is held by Creative World School. This is a fairly common practice in franchising, as the deposit is typically used to cover the franchisor's expenses in evaluating the franchisee's qualifications and assessing potential sites for the school.
The deposit is generally non-refundable once a site for the school has been approved by both parties, assuming the site can be acquired on reasonably acceptable terms. However, a portion of the deposit may be refunded if a Franchise Agreement is not signed and a site has not been approved within 180 days of signing the initial agreement. In this case, Creative World School will refund the deposit less the greater of $3,500 or their out-of-pocket expenses, which may include charges from their architect for preliminary site plans.