What rights does Creative World School have regarding amounts I owe them when they purchase my school?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
The purchase price will be paid at the closing of the purchase, which will take place not later than 90 days after determination of the purchase price. We have the right to set off against the purchase price, and thereby reduce the purchase price by, any and all amounts you or your owners owe to us. At the closing, you agree to deliver instruments transferring to us:
- (i) good and merchantable title to the assets purchased, free and clear of all liens and encumbrances (other than liens and security interests acceptable to us), with all sales and other transfer taxes paid by you;
- (ii) all licenses and permits of the School which may be assigned or transferred; and
- (iii) the leasehold interest and improvements in the Site.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to Creative World School's 2025 Franchise Disclosure Document, when the franchisor purchases a franchisee's school, they have the right to offset any debts the franchisee owes them against the purchase price. This means that if a franchisee has outstanding financial obligations to Creative World School, such as unpaid royalties or other fees, the franchisor can deduct these amounts from the money they pay the franchisee for the school. This directly reduces the amount the franchisee receives at the closing of the sale.
This provision protects Creative World School by ensuring they recover any outstanding debts owed to them by the franchisee at the time of the school's purchase. For a prospective franchisee, this highlights the importance of maintaining good financial standing with Creative World School throughout the franchise term. Failure to do so could result in a significantly reduced payout if Creative World School exercises its option to purchase the school.
It is important for franchisees to keep detailed records of all payments and transactions with Creative World School to avoid potential disputes regarding outstanding amounts. Franchisees should also seek clarification from Creative World School regarding any perceived discrepancies in their account balances to ensure accurate settlement at the time of purchase. Understanding this offset provision is crucial for financial planning and managing expectations regarding the proceeds from a potential sale of the franchise back to Creative World School.