What expenses can Creative World School deduct from the deposit refund?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
(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
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- 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 Creative World School's 2025 Franchise Disclosure Document, under specific conditions where a Franchise Agreement is not signed and a site is not approved within 180 days of signing the initial agreement, Creative World School will refund a portion of the $5,000 deposit. However, from this deposit, Creative World School can deduct the greater of $3,500 or their out-of-pocket expenses. These out-of-pocket expenses include charges by their architect for preliminary site plans for prospective sites.
This means that if a prospective franchisee decides not to move forward or if Creative World School does not approve a site within the specified timeframe, the franchisee will not receive the full deposit back. The deduction of $3,500 or actual expenses covers Creative World School's costs incurred during the evaluation process. The inclusion of architect fees in the deductible expenses indicates that site evaluation is a significant part of the initial assessment, and franchisees should be aware that they will bear these costs if the deal falls through after these services have been utilized.
It is important for potential Creative World School franchisees to understand the conditions under which the deposit is refundable and the potential deductions. Franchisees should inquire about the typical range of out-of-pocket expenses for site plans to better estimate the potential refund amount. This policy is not uncommon in franchising, as franchisors often incur costs in evaluating potential franchisees and locations, but the specific amounts and conditions can vary significantly. Therefore, careful review and understanding of the deposit terms are essential before signing any agreements.