Under what conditions does Deka Lash defer the receipt of the initial franchise fee?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
VIRGINIA ADDENDUM TO THE FRANCHISE AGREEMENT
If any of the terms of the Franchise Agreement are inconsistent with the terms below, the terms below control
The Franchise Agreement is modified to also provide:
Escrow Account:
Due to our financial condition, the Virginia State Corporation Commission's Division of Securities and Retail Franchising requires us to establish an escrow account for all initial franchise fees that we charge. You shall make your check for franchise fees or other payments to the depository (Truist Bank) and send the check to us. Within two business days of our receipt of the check, we will deposit the check into an escrow account that we have established with Truist.Bank.
When we complete all of our pre-opening obligations to you (listed in Item 11 of this Disclosure Document), we will request that you affirm, in writing, that we have completed those obligations and that you assent to release of the funds held in escrow. After receipt of authorization from the Commission, the depository shall release the funds held in escrow by the depository to us to be applied to your account with us.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, the Virginia Addendum to the Franchise Agreement addresses conditions related to the initial franchise fee. Due to Deka Lash's financial condition, the Virginia State Corporation Commission's Division of Securities and Retail Franchising mandates that Deka Lash establish an escrow account for all initial franchise fees. Franchisees in Virginia are required to make their checks payable to Truist Bank (the depository) and send the check to Deka Lash. Deka Lash will then deposit the check into the escrow account within two business days of receipt.
Once Deka Lash has fulfilled all pre-opening obligations outlined in Item 11 of the FDD, they will request written affirmation from the franchisee that these obligations have been met and that the franchisee consents to the release of funds from escrow. Following authorization from the Virginia State Corporation Commission, Truist Bank will release the escrowed funds to Deka Lash, which will then be applied to the franchisee's account.
This escrow arrangement provides a level of financial protection for franchisees in Virginia, ensuring that Deka Lash fulfills its pre-opening obligations before gaining access to the initial franchise fee. It is important to note that this addendum specifically applies to franchise sales in Virginia due to the regulatory requirements imposed by the Virginia State Corporation Commission.