Under the Crisp & Green Area Development Agreement, what is the purpose of the Development Fee?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
2. DEVELOPMENT FEE.
You must pay us a Development Fee in the amount set forth in the Rider. This fee is payable in full when you sign this Agreement. However, you will not be required to pay an initial franchise fee for any of the Franchised Restaurants you develop under this Agreement.
- A. You will sign the Franchise Agreement for your first Franchised Restaurant concurrently with this Agreement. A separate Franchise Agreement must be signed for each Franchised Restaurant as it is identified, which must be consistent with the Development Schedule. Upon the execution of each Franchise Agreement, the terms and conditions of the Franchise Agreement control the establishment and operation of the Franchised Restaurant.
- B. The Development Fee is consideration for this Agreement and not consideration for any Franchise Agreement, is fully earned by us upon execution of this Agreement, and is nonrefundable. If you fail or choose not to develop any Franchised Restaurant that is permitted under this Agreement, you will not be entitled to any return or refund of the Development Fee or any portion thereof.
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
According to Crisp & Green's 2024 Franchise Disclosure Document, the Development Fee is paid by the franchisee as consideration for the Area Development Agreement. The amount of the fee is detailed in the Rider to the agreement and is payable in full when the agreement is signed. This fee compensates Crisp & Green for granting the franchisee the rights to develop and operate a specified number of restaurants within a defined territory, as outlined in the Development Schedule.
Importantly, the Development Fee is distinct from the initial franchise fee typically associated with individual franchise agreements. The document states that franchisees will not be required to pay an initial franchise fee for any of the franchised restaurants they develop under the Area Development Agreement. However, a separate Franchise Agreement must be signed for each restaurant, consistent with the Development Schedule, and the terms of each Franchise Agreement will govern the establishment and operation of that restaurant.
It is crucial to note that the Development Fee is fully earned by Crisp & Green upon the execution of the Area Development Agreement and is nonrefundable. Therefore, if a franchisee fails to develop the number of restaurants outlined in the Development Schedule, they will not receive any portion of the Development Fee back. This highlights the importance of carefully evaluating the Development Schedule and the franchisee's ability to meet its obligations before entering into the Area Development Agreement.