Does Creative World School offer financing directly to franchisees?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
staffing | | | r. Records and reports | Sections 11 and 13 |[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ITEM 10 FINANCING
Although we do not offer any financing, our affiliate, Discount Preschool, in its sole discretion, may finance a portion of the Opening Package Fee up to $50,000 if you meet certain credit requirements. This financing is provided in conjunction with financing that you obtain in connection with the school building and/or land purchase for your Creative World School® Business. The following chart summarizes the terms of such financing, but the actual terms and conditions will be set forth in a Promissory Note and Security Agreement and such other documents as you and Discount Preschool agree upon. The form of Promissory Note, Security Agreement and UCC-1 Financing Statement are attached as Exhibit "M" to this disclosure document.
| Obligation | Section in Agreement | Disclosure Document Item | |
|---|---|---|---|
| s. Inspections and audits | Section 13 and 14 | Items 6 and 11 | |
| t. Transfer | Section 15 | Items 6 and 17 | |
| u. Renewal | Section 3 | Items 6 and 17 | |
| v. Post-termination obligations | Section 17 | Item 17 | |
| w. Non-competition covenants | Sections 10 and 17.4 | Item 17 | |
| x. Dispute resolution | Sections 20 and 21; Section 11 of Lease Assignment; and Conditional Assignment of Telephone Numbers and Listings and Internet Addresses | Item 17 | |
| Topic | Provisions | Explanatory Notes | |
| Item Financed | Portion of Opening Package Fee | At Discount Preschool's discretion and in conjunction with franchisee-obtained SBA financing of the school building and/or land purchase. | |
| Source of Financing | Our affiliate, Discount Preschool, LLC | ||
| Amount Financed | Up to $50,000 (see Note 1) | Represents approximately 1.2% to 3.1% of the total project cost. | |
| Term | 20-year amortization | Term will be identical to terms of SBA 504 financing obtained by franchisee. Principal and interest will be amortized over 20 years. | |
| APR% | 5% to 11% | Rate of interest varies, but will be identical to SBA 504 financing obtained by franchisee. | |
| Installment Payment | Varies, depending on interest | Installments will be identical to | |
| rate, term and amount | SBA financing obtained by | ||
| financed. | franchisee. | ||
| Prepay Penalty | None | Can be prepaid at any time. | |
| Security Required | (See Note 2) | ||
| Liability Upon Default | Default interest is highest allowed by law; entire principal balance immediately due and payable, collection costs, material breach of Franchise Agreement. | (See Note 3) | #### Explanatory Notes: |
- (1) In its sole discretion, Discount Preschool may elect to finance up to $50,000 of the Opening Package Fee if you meet certain credit requirements. The amount financed is generally negotiated on an individual basis depending on several factors, including, without limitation, your credit history, guarantees of your owners, and financial condition. You must obtain financing related to the purchase of your school building and/or land for your Creative World School® Business, in order to qualify for a loan from Discount Preschool.
Source: Item 10 — FINANCING (FDD pages 27–29)
What This Means (2025 FDD)
According to Creative World School's 2025 Franchise Disclosure Document, Creative World School itself does not offer direct financing to franchisees. However, an affiliate, Discount Preschool, may, at its discretion, finance up to $50,000 of the Opening Package Fee for franchisees who meet certain credit requirements. This financing is contingent upon the franchisee obtaining financing for the school building and/or land purchase for their Creative World School business.
The amount financed by Discount Preschool is determined on an individual basis, considering factors such as credit history, guarantees from the franchisee's owners, and overall financial condition. If financing is offered, the franchisee must execute a Security Agreement granting Discount Preschool a security interest in the school's assets, including furniture, fixtures, equipment, inventory, and other assets, to secure the franchisee's obligations under the Promissory Note. Principal owners of the franchisee's business entity may also be required to guarantee these obligations.
The financing terms include a 20-year amortization schedule, with the interest rate mirroring the rate of the franchisee's SBA 504 financing. While there is no prepayment penalty, a default triggers an increased interest rate (the lesser of 18% or the maximum rate permitted by law) and immediate acceleration of the entire unpaid balance. Events of default include failure to make timely payments or breaches of the Franchise Agreement or other agreements with Discount Preschool or its affiliates. Defaulting on the financing also constitutes a default under the Franchise Agreement.
In summary, while Creative World School does not directly provide financing, its affiliate offers limited financing under specific conditions, primarily related to the Opening Package Fee and contingent on the franchisee securing separate financing for real estate. This arrangement is secured by the school's assets and potentially personal guarantees, with significant penalties for default, highlighting the importance of carefully evaluating the terms and conditions of any financing offered.